Q18 of 25 Page 4

“As income increases, consumption expenditure does not increase at the same rate as income” why?

● At a lower level of income, a consumer spends a minimum amount of his income on his basic requirements.


● With the increase in income, the consumption expenditure does not increase at the same rate as income because a person will not spend his entire increment in consumption.


● It is basic human behavior of a rational consumer.


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