Question

Distinguish between Consumption Function equation and Saving Function equation.

Answer 1

Consumption Function equation:

C = C + MPC (Y)

Where C = Total Consumption

C = Autonomous Consumption

MPC = Marginal Propensity to Consumer

Y = Income

Saving Function equation:

• = -* + MPS (Y)

C = Autonomous consumption

• = Total Saving

MPS = Marginal Propensity to Save

Y = National Income