How does an increase in disposable income affectthe consumption function? How does an increase in expected future income affectthe consumption function?

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How does an increase in disposable income affectthe consumption function? How does an increase in expected future income affectthe consumption function?
Answered Same DayDec 20, 2021

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Robert answered on Dec 20 2021
3 Votes
Answer:
Consumption function shows consumption expenditure at different levels of income. It tell
us how consumption responds with an increase in income. Consumption function shows
the functional relationship between the consumption and the disposable income. Since
Consumption is determined by the disposable income or in other words we can say disposable
income as left over income after taxes. Consumer can do two things out of disposable
income that is either they can save it or they can spend it.So when consumer receive the
disposable income they had to make choice between either saving or spending. The fraction of
each dollar of disposable income that is spent is called marginal propensity to...
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