The consumption function shows the graphical relationship between income and consumer spending.
Consumption function is the relationship between income and consumer spending and the various factors determining it. At the household level, these factors may include wealth, income, expectations about the level and riskiness of future income or wealth and various other factors.
The most important determinant of consumer spending is disposable income. If people do not have enough money they cannot spend it. Low-income consumers spend a greater portion of their disposable income.
Hence, businesses use consumer spending data in their supply and demand economic calculations.
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