The consumption curve is upward sloping so its relationship with income is positive. That is if income rises then consumption also rises and if it falls so as the consumption. The slope of the consumption curve is less than 1 (1<c<0, where c is the slope of the consumption curve). This means when there is a rise in income of GH₵1.00, there would be an increase in consumption irrespective of the initial income. The consumption function may be curved, this means a typical consumer spends less of his increased income received as his/her income rises.
Now, if a consumer has no income he/she still consumes. Let's say Ama is a consumer with an income of GH₵25.00 and consumes 0.2 of the income and she has a garden of crops which when she harvests may cost GH₵20.00. Let's say Ama did not receive her monthly salary this month due to some factors and she absolutely has no income. She will consume from her garden since whether or not she receives her income, she still has crops from her garden which she can consume, though the crops from her garden are not from her income is still forms part of her consumption. So this part of the consumption that is not affected by income and is called the Autonomous Consumption. The autonomous remains the same whether income increases or decreases. Adding the autonomous consumption to the consumption function changes our previous consumption function ( C = cY) to
C = a +cY, where a is the autonomous consumption.
Thus our new consumption graph will have an intercept a.
Lecture notes:Dr. Monica Lambon-Quayefio, College of Social Sciences,Economics Department,2018/2019 Academic Year
Book Reference:Case,K. E., Fair, R. C., & Oster, S. M. (2012). _ Principles of Economics_ .10th ed, USA: Pearson Education Inc
Thank you for reading. please all views and criticism are welcomed so feel free to leave your views and criticism in the comment.
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