Consumption Function
Consumption Function The consumption function or propensity to consume shows the "functional relationship between total consumption and the national income." Symbolically, the relationship is represented as C = f (Y), where C is consumption, Y is income, and f is the functional relationship. C is the dependent variable of Y and Y is the independent variable. This relationship is based on this assumption that “all possible influences on consumption” are held constant. Consumption function is the whole schedule which describes the amounts of consumption at various levels of income. The schedule of consumption function shows that when income rises, consumption also rises but not as much as the income. The reason behind it is that a part of the increment in income is saved. PROPERTIES OF THE CONSUMPTION FUNCTION The consumption function has two technical attributes or properties: The Average propensity to Consume: The average propensity to consume may be defined as the ratio...