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A consumer function describes, about which the consumption depends. It describes the dependence of the consumption within one period of the income (partly also of other variables, e.g. fortunes or price level). A beginning for an overall economic consumer function comes from John May pool of broadcasting corporations Keynes.

Factors

After Keynes the consumption does not depend considerably on the current income, however on the past or expected future (absolute income hypothesis). Herein its theory differs clearly from the neoclassical theory.

If the overall economic consumption with C and the overall economic income with Y are designated, then one can write:

C = C (Y)

After Keynes however no one-sided causal connection between Y and C exists. it sees beside it still 24 further factors, which could affect the consumption. One of it is the Zinsniveau whose influence he estimates however as substantially smaller than the neoclassical theory.

Function

The consumption results from the autonomous consumption (C_a) and the available income (Y) multiplies by the marginal consumer inclination (C_Y).

C (Y) = C_a + C_Y * Y

Characteristics of the keynesianischen consumer function

These characteristics of the consumer function according to the absolute income hypothesis must be fulfilled, so that one can speak of a "keynesianischen consumer function":

  1. The marginal note consumer inclination lies between 0 and 1
  2. The average consumer inclination (thus C/Y) sinks with rising Y.
  3. The consumption is determined by the current income; there is not the possibility of the raising of credit.

Criticism

The consumer function, how it was set up by Keynes, considers neither the possible changes of the future income still the effects of the interest rate. The connection between consumption and income, how it is suggested in the function, can be confirmed empirically, however one cannot confirm linear connection here contrary to the consumer function. Those extension here which can be mentioned is the permanent income hypothesis of Milton Friedman.

 

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