IN TERMS OF THE CONSUMPTION FUNCTION WHY IF THE GOVERNMENT GIVES A RICH PERSON A TAX CUT THEY MIGHT SAVE IT INSTEAD OF SPEND IT.BECAUSE ACCORDING...

Consumption function is the relationship between the
disposable income of an individual or a household and the total consumption and saving.
This function is usually depicted in form of a table or a
graph.

No two individual or households in an economy behave
exactly alike in terms of their consumption and saving behavior. However, when we look
at the general behavior some common patterns emerge.

The
total consumption of a person expressed as a percentage of the total disposable income,
tends to decrease, and that of saving increases as the disposable income rises. Of
course the sum of expenditure plus saving always equal to the disposable
income.

When the disposable income is zero, a person still
has to spend something to survive, and therefore the actual spending is more than the
income. This entire spending, exceeding the disposable income, can be seen as negative
spending. As the disposable income rises the expenditure  rises also, and the negative
saving gets reduced till the income and expenditure reach a break even point where
income exactly equals expenses and saving is zero.

When the
income is increased beyond this break even point, the expenditure is less than the
income. The difference between the two is the saving. The percentage of saving as a
percentage of total disposable income increases with the disposable income. At very high
income it is possible that almost entire increase in the income is used for saving and
very little for spending.

A rich person is thus at a level
of income where the saving percentage is high. Thus when the disposable income of a rich
person is increased by tax cuts, the chances are that a larger portion of it will be
saved rather than spent.