Tabular explanation of Consumption function

Consumption function depends on income. It is directly related to the level of income. It increases as income increases. However, there is always some minimum level of C (consumption) irrespective of level of Y. Also, increase in C tends to lag behind the increase in Y. Because, after certain level of Y is reached, people start saving a part of Y. As shown below:

Y(Rs)	C (Rs)
0 20 40 60 80 100 120	30 35 40 45 50 55 60

The above table shows:

1) 30 is the minimum level of C even when Y = 0. Survival requires that C be at least 30 even with zero income. The level of consumption at zero level of income is called autonomous consumption.

Consumption Function

The amount of money spent by the people on the purchase of goods and services in order to satisfy their wants directly is called consumption expenditure. 

Consumption function or propensity to consume shows the relationship between total desired consumption spending by the households and the factors that determine it. The factors that can affect consumption of a person are income, rate of interest, wealth, liquid assets, future expectation about income, consumer credit, distribution of income, etc.

However among all the factors mentioned above Income is considered to be a major factor of propensity to consume.

Keynesian theory of consumption function, therefore, shows the functional relationship between the desired consumption expenditure and income.

Propensity to consume has two aspect:

1) Average propensity to consume

2) Marginal propensity to consume