Q. 165.0( 1 Vote )

Why does the cons

Answer :

Consumption function shows the relationship between consumption and income. The level of consumption is an increasing function of the level of income. As income increases consumption also increases, but less than proportionately. Thus, consumption is an increasing function of income. The consumption curve is an upward sloping straight line. But the curve does not start from the origin. This is because of the existence of autonomous consumption. Autonomous consumption is the level of consumption irrespective of the level of income. This is carried out by dissaving. Mathematically, it can be expressed as:


C=a+ bY; C- level of consumption


a- autonomous consumption


b- Marginal Propensity to Consume (MPS)


Y- the level of income



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