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Mar 24, 2023 · Consumer theory is the study of how people decide to spend their money based on their individual preferences and budget constraints. Building a better understanding of...
- Daniel Liberto
Consumption and Disposable Personal Income. It seems reasonable to expect that consumption spending by households will be closely related to their disposable personal income, which equals the income households receive less the taxes they pay. Note that disposable personal income and GDP are not the same thing.
According to Abel (1990:729), the consumer maximises utility subject to a single lifetime budget constraint. There is no static or period by-period, budget constraint that requires consumption in a period to equal the income in that period.
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Consumption theory. The rational optimization framework. In their studies of consumption, economists generally draw upon a common theoretical framework by assuming that consumers base their expenditures on a rational and informed assessment of their current and future economic circumstances.
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OVERVIEW. This chapter explains the role of consumption expenditures in modern economies and their significance for the determination of the level of output and employment in an economy. It starts with a presentation of the theory of intertemporal choice that forms the basis of mainstream consumption functions.
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Apr 24, 1999 · Not surprisingly, the consumption function has been the most studied of the aggregate expenditure relationships and has been a key element of all the macroeconometric model building efforts since the seminal work of Klein and Goldberger (1955).
October 2017. Annotate. Cite. Permissions. Share. Extract. Consumption decisions are crucial determinants of business cycles and growth. As a share of US gross domestic product (GDP), personal consumer expenditure has grown steadily since the early 1970s to reach, by 2008, 70 percent of GDP.
