Question

Give reason or explain.

The Propensity to Consume means consumption function.

Answer 1

Consumption function is also known as ‘Propensity to Consume’. It depicts a relation between the consumption and the income, which means that it depicts how a change in the income causes a change in the consumption pattern of an individual.

C = f(Y)
Where,
C represents consumption expenditure
Y represents aggregate income; and
 f represents the functional relationship between the consumption expenditure and the level of the disposable income.