John Maynard Keynes’ Consumption Function

John Maynard Keynes established the consumption function indicating that the most determined factor of consumption spending is disposable income; that is income after subtracting the amount of taxes. However, other factors may impact on the consumption function, as culture, religion, education, location, family size, and structure. Other factors are varying over time; therefore the Keynesian function is a short-run function, because we are assuming that factors other than income are constant but only in the short-run.

C= a + by

C= Consumption function

a= constant factors other than income

b= behavioural coefficient or the marginal propensity to consume

y= national income.