In economics, the consumption function describes a relationship between consumption and disposable income. The concept is believed to have been introduced into macroeconomics by John Maynard Keynes in 1936, who used it to develop the notion of a government spending multiplier.

Its simplest form is the linear consumption function used frequently in simple Keynesian models:

where ${\displaystyle a}$ is the autonomous consumption that is independent of disposable income; in other words, consumption when disposable income is zero. The term ${\displaystyle b\cdot Y_{d}}$ is the induced consumption that is influenced by the economy's income level ${\displaystyle Y_{d}}$. The parameter ${\displaystyle b}$ is known as the marginal propensity to consume, i.e. the increase in consumption due to an incremental increase in disposable income, since ${\displaystyle \partial C/\partial Y_{d}=b}$. Geometrically, ${\displaystyle b}$ is the slope of the consumption function.

Keynes proposed this model to fit three stylized facts:

By basing his model in how typical households decide how much to save and spend, Keynes was informally using a microfoundation approach to the macroeconomics of saving.

Keynes also took note of the tendency for the marginal propensity to consume to decrease as income increases, i.e. ${\displaystyle \partial ^{2}C/\partial Y_{d}^{2}<0}$. If this assumption is to be used, it would result in a nonlinear consumption function with a diminishing slope. Further theories on the shape of the consumption function include James Duesenberry's (1949) relative consumption expenditure, Franco Modigliani and Richard Brumberg's (1954) life-cycle hypothesis, and Milton Friedman's (1957) permanent income hypothesis.

Some new theoretical works following Duesenberry's and based in behavioral economics suggest that a number of behavioural principles can be taken as microeconomic foundations for a behaviorally-based aggregate consumption function.