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Explain the investment function with the help of graphs. (4 marks question )

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In a two-sector model, there are two sources of final demand. The first is consumption and the second is investment. The investment function was shown as I = I. 

Graphically, this is shown as a horizontal line at a height equal to I above the horizontal axis. 

In this model, I is autonomous which means, it is the same no matter whatever is the level of income. The consumers demand can be expressed by the equation C = C + cY, where is C autonomous expenditure and c is the marginal propensity to consume.

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