ECONOMICS (CBSE/UGC NET)

Detailed explanation-1: -The level of consumption that takes place in an economy at a given point depends upon the purchasing power of an economy which depends upon the net disposable income of an economy which in the income spend on consumption after adjusting savings from it.

Detailed explanation-2: -In aggregate, when disposable income increases, households have more money to either save or spend, which naturally leads to a growth in consumption. Consumer spending is one of the most important determinants of demand; it creates the demand that keeps companies profitable and hiring new workers.

Detailed explanation-3: -Consumption is closely related to disposable personal income and is represented by the consumption function, which can be presented in a table, in a graph, or in an equation. Personal saving is disposable personal income not spent on consumption.

Detailed explanation-4: -Autonomous consumption is defined as the expenditures that consumers must make even when they have no disposable income. These expenses cannot be eliminated, regardless of limited personal income, and are deemed autonomous or independent as a result.

Detailed explanation-5: -If disposable income decreases, households have less money to spend and save, which then forces consumers to consume less and become more frugal. This decrease in consumption could then decrease corporate sales and corporate earnings, decreasing the value of individual stocks.