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What factors determine consumption

What factors determine consumption

Answers

Dana
Attitudes and expectations of consumers: both change in consumer attitudes and expectations will affect the consumption behavior. For example if consumers expect the increase in a price of a certain good, then they will increase their current purchase of the good
Availability of consumer credit: readily available consumer credit leads to consumers borrowing for consumption purposes. This pushes up the aggregate consumption function
Liquid assets: the higher the stock of liquid assets, the higher the marginal propensity to consume
Wealth: high stocks of wealth leads to low marginal value of wealth hence less desire to accumulate more. As a result, this leads to increased consumption
Money illusion: consumption will go up when consumers suffer from money illusion. Money illusion occurs when consumers fail to notice the price increase accompanying the increase in their nominal income thereby behaving as if the real income has changed when it has not
Dana05 answered the question on July 18, 2019 at 19:49

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