Question

Distinguish between:

Consumption Function and Saving Function

Answer 1

Consumption Function	Savings Function
It depicts the relationship between consumption expenditure and the level of disposable income	It depicts the relationship between savings and the level of disposable income.
C = f (Yd), where C represents consumption expenditure Yd represents disposable income.	`S = -barS + sY_d` Where, `barS` represents autonomous saving* s represents marginal propensity to save (MPS) Yd represents disposable income.
It shows how a change in income influences the consumption pattern.	It shows how a change in income influences savings.