saved. In this way, consumption and saving move together. ( ) Increase in income always leads to an increase in both consumption and saving. This means that increased income is unlikely to lead to fall in either consumption or saving.
Thus with increased income both consumption and saving increase. Table . The three propositions of the law Income Y Consumption C Savings S = Y - C Proposition ( ): Income increases by ₹ crores and the increase in consumption is by ₹ crores. Proposition ( ): The increased income of ₹ crores in each case is divided in some proportion between consumption and saving respectively.
(i.e., ₹ 50crores in consumption and ₹ crores in savings). Proposition ( ): As income increases consumption as well as saving increase. Neither consumption nor saving has fallen. Diagrammatically, the three propositions are explained in Figure .
. Here, income is measured horizontally and consumption and saving are measured on the vertical axis. С is the consumption function curve and ° line represents income consumption equality. c = y y c = + / y x Income Consumption and savings Proposition ( ): When income increases from to consumption also increases from to but the increase in consumption is less than the increase in income, is saved.
- - Consumption and Investment Functions Proposition ( ): When income increases to and , it is divided in some proportion between consumption by and and saving by and respectively. Proposition ( ): Increases in income from to lead to increase in consumption from to and increase in saving from10 to . It is clear from the widening area between ° line and С curve. .
. Determinants of Consumption function: Subjective and Objective Factors J.M Keynes has divided factors influencing the consumption function into two namely: Subjective factors and Objective factors A) Subjective Factors Subjective factors are the internal factors