Q.'Consumption function curve of an involuntary unemployed workers start from some positive level on Y-axis even at zero level of Income.' Justify the given statement.

The key idea here is the autonomous consumption component of the consumption function. Even with zero income, an individual must consume to survive — this minimum level of consumption is called autonomous consumption ($\bar{C}$), and it is financed by past savings or borrowing.

For an involuntary unemployed worker, income is zero, but consumption cannot fall to zero. The consumption function is written as $C = \bar{C} + bY$, where $b$ is the marginal propensity to consume. When $Y = 0$, we get $C = \bar{C} > 0$. …

The Core Concept: Autonomous Consumption

The statement touches on a fundamental idea in Keynesian economics — that consumption has two parts: a part that depends on income (induced consumption) and a part that does not (autonomous consumption). For an involuntary unemployed worker, income is zero, but consumption cannot fall to zero. People must eat, pay rent, and meet basic needs. This minimum level of spending, independent of current income, is what pushes the consumption function curve to start from a positive point on the vertical (consumption) axis.

Think of it this way: the consumption function is typically written as $C = \bar{C} + bY$, where $\bar{C}$ is autonomous consumption (the intercept), $b$ is the marginal propensity to consume, and $Y$ is income. When $Y = 0$, $C = \bar{C} > 0$. For an unemployed worker, $\bar{C}$ represents the bare minimum survival spending.

Step-by-Step Reasoning

1. Identify the economic agent: An "involuntary unemployed worker" is someone who is willing and able to work at the prevailing wage but cannot find a job. Their current income $Y$ is zero. This is different from voluntary unemployment, where a person chooses not to work.

2. Recognize the consumption constraint: Even with zero income, the worker cannot stop consuming. Basic necessities — food, shelter, clothing — are non-negotiable. This forces consumption to be positive at $Y = 0$. In the consumption function $C = \bar{C} + bY$, setting $Y = 0$ gives $C = \bar{C}$. The intercept $\bar{C}$ is precisely this autonomous consumption.

3. Understand the source of this consumption: Where does the money come from? The worker finances this autonomous consumption through:

   • Past savings (dissaving)
   • Borrowing from friends, family, or informal lenders
   • Government transfers (unemployment benefits, if available)
   • Support from community or charity
   Watch out

   A common mistake is to think that consumption must equal income. In reality, consumption can exceed income in the short run — this is called dissaving. The consumption function for a zero-income worker lies above the 45-degree line (where $C = Y$) because $C > Y$. …