-
The Psychological law of consumption states that
-
- proportionate increase in consumption is less than proportionate increase in income
- increase in income is equal to increase in consumption
- increase in consumption is greater than increase in income
- consumption does not change with a change in income
- proportionate increase in consumption is less than proportionate increase in income
Correct Option: A
According to Keynes’ psychological law of consumption, increased aggregate consumption due to increased aggregate income – aggregate consumption increases with increase in aggregate income but the increase in consumption is less than the increase in the income. This is because when the basic necessities or demand of the people are already fulfilled, they start saving the extra additional income.
