Question

What are the determinants of consumption function?

What are the determinants of consumption?

Give the subjective and objective factors of consumption function.

Answer 1

1. Subjective Factors: Subjective factors are linked to human psychology, social customs, and institutional influences. These include traits and motivations such as foresight, desire for financial independence, career goals, miserly behavior, social status, business expansion goals, preference for liquidity, as well as attitudes toward modernization and management.
2. Objective Factors: These are the factors that influence changes in consumption levels. They include variations in money income, real income, unexpected gains or losses, institutional financial policies, shifts in expectations, wage policies, and the availability of liquid assets, among others.