Consumption function facts for kids
In economics, the consumption function shows a relationship between consumption and disposable income. It is believed that John Maynard Keynes introduced the idea in macroeconomics in 1936. He used it to develop the idea of a government spending multiplier.
Details
Its simplest form is the linear consumption function. It is used often in simple Keynesian models:
where is the autonomous consumption that is independent of disposable income; in other words, consumption when there is no income. The term is the induced consumption that is influenced by the economy's income level. It is generally assumed that there is no correlation or dependence between and C.
(Undergraduate level discussion of the subject.) (Graduate level discussion of the subject.)
See also
In Spanish: Función de consumo para niños