Give reasons or explain. 5) The Propensity to Consume means consumption function.

Give reasons or explain.

5) The Propensity to Consume means consumption function.

Answer: 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 consumption expenditure and the level of disposable income.

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