🚡The consumption function represents the relationship between consumption and disposable income. It explains how households spend their income on goods and services.
📈Disposable income is the income that remains after deducting taxes and mandatory expenses. It includes government transfers that households can save or spend.
💰The marginal propensity to consume (MPC) refers to the proportion of disposable income that consumers spend on consumption rather than savings.
💱The marginal propensity to save (MPS) represents the change in savings that occurs in response to an incremental change in disposable income.
📋Consumer spending is influenced by factors such as income, the desire to save, and changes in disposable income. These factors determine the slope of the consumption function.