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Briefly explain consumption function.

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The consumption function or propensity to consume refers to income consumption relationship. It is a “functional relationship between two aggregates, i.e., total consumption and gross national income.”

Symbolically, the relationship is represented as C= f(Y), where С is consumption, Y is income, and/is the functional relationship. Thus the consumption function indicates a functional relationship between С and Y, where С is the depend at and Y is the independent variable, i.e., С is determined by Y. This relationship is based on the ceteris paribus (other things being equal) assumption, as such only income consumption relationship is considered and all possible influences on consumption are held constant.

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