Let us make an in-depth study of Consumption. After reading this article you will learn about: 1. Importance of Consumption 2. The Keynesian Short-Run Consumption Function 3. Optimisation 4. Effect of Changes in Income on Consumption 5. Effect of Changes in the Real Interest Rate on Consumption. Importance of Consumption: The consumption function is of considerable importance for macroeconomic analysis [...]
Read this article to learn about the most frequently asked questions on consumer equilibrium demand. Q.1. Define Utility. Ans. The extent to which a consumer expects a commodity to satisfy his want for same is known as utility of that commodity for him. Q.2. Define marginal utility. Ans. Marginal Utility of a commodity is the additional satisfaction derived by consuming [...]
The following points will highlight the three main assumptions of Keynes’ psychological law. 1. It presumes a constant psychological institutional complex. In other words, it means that consumption depends upon income alone and other institutional and psychological factors such as income distribution, price level, population growth, fashion, tastes and habits do not changes. In the short period, it may not [...]