Consumption function - The relationship between the consumption expenditure and the income is known as consumption function.

C = f(Y)

where C = consumption expenditure

f = function

Y = income 

Algebraic Expression of Consumption Function -The algebraic expression of Consumption Function is given by:

C = C bar + b(Y)

Here, C = consumption expenditure

C bar = minimum level of consumption at zero income 

It is of two types :

(i) Average Propensity to Consume (APC)- The ratio between the consumption expenditure and income is called Average Propensity to Consume.

APC = C/Y

(ii) Marginal Propensity to Consume (MPC) -

The ratio between the change in consumption expenditure with change in income  is called Marginal Propensity to Consume.

MPC = ΔC/ΔY

Saving Function - The relationship between

saving and income is known as Saving Function.

S = f(Y)

Saving is the residual of income after consumption.

S = Y - C

Algebraic Expression of Saving Function- It is given by

S = (-) S bar + b(Y)

(i) It is of two types:

(i) Average Propensity to Save (APS) -The ratio between total saving and the total income in an economy at a given level of income is termed as Average Propensity to save (APS).

APS = S/Y

 Marginal Propensity to Save (MPS)- The ratio between the change in saving with the- change in income is known as Marginal Propensity to save.

MPS = ΔS/ΔY.