Therefore a change in the disposable income leads to movement along the consumption function. Any other change will cause a shift in the consumption function. Consumer wealth Note consumer wealth is different than consumer income. Wealth has little to do with income. Many elderly have little income, but significant wealth.
Wealth can be in the form of bank accounts, stocks, bonds, etc.
If wealth is increased, there will be less spending at each level and the consumption function will shift up. The price level works through real wealth and not real income. Inflation rate Inflation refers to how quickly prices change, not to the level. It was previously believed that with higher inflation people would spend faster and therefore the consumption function would shift up. However, recent events have demonstrated that people may spend a higher proportion of their income when inflation is low.