Question

Write answers in ‘one’ or ‘two’ paras each : 

Explain the concept of saving function. 

Answer 1

The consumer does not spend the entire increase in his income on consumption. Rather, a portion (generally fixed) of the increase in income is kept as savings. Thus, as the income increases, savings also increase. This relationship between the savings and income is depicted in a functional form by the savings function. The savings function can be expressed as: