Consumption
Propensity to consume is also called consumption function. In the Keynesian theory, we are concerned not with the consumption of an individual consumer but with the sum total of consumption spending by all the individuals. However, in generalizing the consumption behaviour of the whole economy, we have to draw some useful conclusions from the study of the behaviour of a normal consumer, which may be valid for all consumers’ behaviour of the economy. Aggregate consumption depends on consumption function or propensity to consume.
The economic term ‘consumption’ means the amount spent on consumption at a given level of income. ‘Consumption function’ or ‘propensity to consume’ means the whole of the schedule showing consumption expenditure at various levels of income. It tells us how consumption expenditure increases as income increases. The consumption function or propensity to consume, therefore, indicates a functional relationship between the aggregates, viz., total consumption expenditure and the gross national income. It is a schedule that expresses relationship between consumption and disposable income.
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Dr. M Naeem Anjum
