Keynesian Consumption Function

Keynesian Consumption Function (Absolute Income
Hypothesis)

Keynes had 3 conjectures about consumption:
(i) Income (Y) is the predominant determinant of
consumption (C);

(ii) MPC is positive but less than 1, indicating that C
increases whenever income increases but the increase
in C is less than the increase in Y;

The ratio of consumption to income i.e. the APC falls
as Y increases.

The Keynesian consumption function is usually expressed as:
C = + cY

Where : = autonomous consumption
c = MPC
Y = current aggregate disposable income