Equation for a Straight Line Upward Rising Consumption Function:

The consumption function is an economic concept that represents the relationship between disposable income and consumer spending. It shows how changes in income affect consumer spending behavior. A straight line upward rising consumption function implies that as income increases, consumer spending also increases at a constant rate.

The equation for a straight line upward rising consumption function can be represented as:

C = a + bY

Where:
- C represents consumer spending
- Y represents disposable income
- a represents autonomous consumption (consumption that does not depend on income)
- b represents the marginal propensity to consume (the fraction of additional income that is spent on consumption)

Diagram:

To better understand the concept, let's draw a diagram illustrating the relationship between consumer spending and disposable income.

1. Draw the axes:
- The horizontal axis represents disposable income (Y).
- The vertical axis represents consumer spending (C).

2. Plot the points:
- Start by plotting the point (0, a) on the vertical axis, representing the autonomous consumption.
- Then, plot additional points by calculating consumer spending using the equation C = a + bY. Choose different values of disposable income (Y) and calculate the corresponding consumer spending (C).

3. Draw the line:
- Connect the plotted points with a straight line. The slope of the line represents the marginal propensity to consume (b).

4. Label the axes:
- Label the horizontal axis as "Disposable Income (Y)" and the vertical axis as "Consumer Spending (C)".

5. Add title and key information:
- Add a title to the graph, such as "Upward Rising Consumption Function".
- Include a key or legend that explains the meaning of the line and any other relevant information.

Explanation:

The equation C = a + bY represents a straight line upward rising consumption function. The intercept term "a" represents the consumer spending when disposable income is zero. This autonomous consumption can be attributed to factors other than income, such as savings, borrowing, or government assistance. The slope term "b" represents the marginal propensity to consume, indicating the change in consumer spending for each unit increase in disposable income.

The graph visually represents this relationship. As disposable income increases, consumer spending also increases at a constant rate. The slope of the line represents the marginal propensity to consume, indicating the fraction of additional income that is spent on consumption. The intercept represents the level of autonomous consumption.

By analyzing this graph, economists can gain insights into consumer behavior and predict changes in consumer spending based on changes in disposable income. It is a fundamental concept in macroeconomics and helps in understanding the drivers of economic growth and stability.