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“Under a study, examining… (Class 12 Economics 2026, Q16B)

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EconomicsCBSE Class 12 · Board exam 2026, set 58/1/1 · 6 marks · Long answer

CBSE Class 12 Economics 2026: question 16(B)

Set in the CBSE Class 12 board exam of 2026, paper 58/1/1, section A, question 16(B), for 6 marks. Try it first; the hints and our step-by-step solution are below.

Q16(B) · 6 marks · Long answerCompetency-basedDetermination of Income and Employment

“Under a study, examining the spending habits of a hypothetical economy, it was observed that even households with zero income managed to consume basic necessities.
As the income of people increased, their consumption also increased, but not as rapidly as income.”
Based on the given text and common understanding, answer the following questions :

  1. (i)

    Identify and elaborate the type of consumption indicated in the first para of the above text.

    3 marks
  2. (ii)

    Explain, the reason behind the positive slope of Aggregate Demand Curve.

    3 marks

Source: official question paper from cbse.gov.in (PDF). See it in the full 2026 board paper, set 58/1/1.

Hints

Open one hint at a time and try again before the next.

Hint 1

What do households consume when their income is zero?

Hint 2

Which component of AD changes with income?

Step-by-step solution

Each step shows the marks it earns, as an examiner would award them. Checked by an independent re-solve from the question paper.

  1. (i) Consumption at zero income is autonomous consumption (c̄).

    1 mark

  2. (i) It does not depend on the level of income. It is the minimum consumption needed for survival, financed out of past savings or borrowing even when income is zero; it is the intercept of the consumption function C = c̄ + bY.

    2 marks

  3. (ii) Aggregate demand AD = C + I. Investment is assumed autonomous (fixed), but consumption rises with income because MPC is positive (0 < b < 1). So when income rises, consumption and hence AD rise. AD therefore has a direct relation with income and the AD curve slopes upward, starting from c̄ + Ī at zero income.

    3 marks

Answer: (i) Autonomous consumption, the income-independent minimum consumption. (ii) AD = C + I rises with income because consumption rises with income (positive MPC), so the AD curve slopes upward.

Where the marks are

  • Autonomous consumption identified (1)
  • Its meaning (2)
  • Positive slope of AD explained through C rising with income (3)

Revise the chapter

Practise this chapterBoard-style questions from Determination of Income and Employment, one at a time, marked against the answer key and marking points.Back to the full paper2026 board paper, set 58/1/1: every question, by section.

The question is transcribed from the official paper; figures are described in words. The solution, hints and chapter tag are ours. Spotted an error? Write tosupport@questionbuddy.in.