An equation that explains the relative influence of different factors on the consumption of households.
Below is an example of a consumption function in which the level of consumption is directly related to the level of disposable income. The following consumption function (C = xYd +c) has a slope equal to x, which represents the marginal propensity to consume for a consumer. There are different varieties of consumption functions some of a convex or concave shape. But the one below illustrates a linear consumption function with a constant level of MPC throughout all levels of disposable income i.e. consumers will always spend the same fraction of a new amount of disposable income regardless of their current level of income.
