Consumption Function describes relationship between disposable income and consumption spending. Form: C = a + bY, where C is consumption, Y is disposable income, a is autonomous consumption (minimum consumption even with zero income), b is Marginal Propensity to Consume (MPC)—fraction of additional income spent on consumption. MPC: Typically 0 to 1; if MPC = 0.8, additional rupee generates 80 paise additional consumption. Marginal Propensity to Save (MPS): 1 - MPC; if MPC = 0.8, then MPS = 0.2 (additional 20 paise saved). Average Propensity to Consume (APC): C/Y; declines as income increases (lower proportion spent on consumption at higher incomes). Shifts in consumption function: Due to income distribution, wealth, expectations, interest rates, cultural factors. Graphically: Upward-sloping line with positive intercept; slope equals MPC. Real example: If household income doubles, consumption increases but less than proportionally (saves the difference). Indian context: Rising incomes increase consumption; seasonal income (agriculture) affects consumption pattern. ICAI questions: Calculating MPC/MPS, determining consumption from income, analyzing shifts. Exam tip: "MPC + MPS = 1" always; MPC typically higher for low-income groups (spend most of additional income).