Consumption function (消费函数 xiāo fèi hán shù) represents the functional relationship between consumption and the various factors determining it. A common example indicates the relationship between disposable income and consumer spending: C = a + b (Y – T), where C stands for consumption, a stands for autonomous consumption, b stands for marginal propensity to consume, Y stands for income and T stands for taxation.
Part 1: Breakdown of Words
- “Consumption” (消费 xiāo fèi) derives from:
- Function (函数 hán shù) as in “convex function” (凸函数 tū hán shù) or “exponential function” (幂函数 mì hán shù).