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.
