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What is Consumption Expenditure?

It refers to total expenditure of households on purchasing goods and services

This expenditure is influenced by level of disposable income

Higher the income, Higher the Consumption Expenditure

However, at nil level of income, still there is some Consumption Expenditure

This is because of autonomous consumption expenditure

(It refers to minimum expenditure which is required for survival.

It will be spent even at 0 level of income)


Table and Graph of Consumption Expenditure

What is Consumption - Teachoo.jpg

Graph of Consumption Curve - Teachoo.jpg

Is Consumption Expenditure Referred to in above concept is Ex Ante or Ex Post?

Ex Ante means 'Before the event'


Ex Post means 'After the event'

While Calculating Aggregate Demand, we take Planned Consumption Expenditure

Hence Aggregate Demand taken is 'Ex Ante'


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Question 1

What is Consumption Expenditure?

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What is Consumption Expenditure? It is total expenditure of households on purchasing goods and Services Note This Expenditure increase with increase in Income Income (Y) Consumption Expenditure (C) 0 10000 20000 30000 40000 50000 60000 4000 12000 20000 28000 36000 44000 52000 1. Even at 0 level of income, there is some minimum expenditure. This is called Autonomous Consumption Expenditure However, amount of increase is less than increase in Income Example (Income increase by 10000,but Consumption Expenditure increase by 8000) Graph of Consumption Curve Income (Y) Consumption Expenditure (C) 4000 12000 20000 28000 36000 44000 52000 Steps On X Axis, We represent Income On Y Axis, We Represent Consumption Expenditure It can be seen that Consumption Curve (C) is Positively Sloping (It increases with increase in income) Also Consumption curve Starts from Point P and Not Origin OS Represents Autonomous Consumption Expenditure (minimum level of expenditure even at 0 level of income)

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CA Maninder Singh is a Chartered Accountant for the past 13 years and a teacher from the past 17 years. He teaches Science, Economics, Accounting and English at Teachoo