Consumption function, Managerial Economics

The Consumption Function

The consumption function is the relationship  [expressed in mathematical or diagrammatic form] between planned consumption and other independent variables, particularly income.

The consumption function is one of the most important relations in Macro-economics.  Consumption is the largest single component of aggregate expenditure and if we are to predict the effects of income and employment of variations in private investment and in government spending, we must know how consumption varies in response to changes in income.  Thus it is important to take a closer look at the consumption.

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