Question

Explain the concepts of Consumption Function.

Answer 1

The consumption function, or Keynesian consumption function, is an economic formula that represents the functional relationship between total consumption and gross national income. It was introduced by British economist John Maynard Keynes, who argued the function could be used to track and predict total aggregate consumption expenditures.

consumption function -

C = A + MD

Where

C = Consumer spending

A = Autonomous consumption

M = Marginal propensity to consume

D = Real disposable income