Consumption function

In economics, the consumption function describes a relationship between consumption and disposable income. Algebraically, this means where is a function that maps levels of disposable income —income after government intervention, such as taxes or transfer payments—into levels of consumption . The concept is believed to have been introduced into macroeconomics by John Maynard Keynes in 1936, who used it to develop the notion of a government spending multiplier. Its simplest form is the linear consumption function used frequently in simple Keynesian models: