Question

Give any four measures to raise propensity to consume.

Explain measures which can be followed to raise Propensity to consume.

Answer 1

1. Redistribution of Income: By providing better employment opportunities, increasing expenditure on welfare, and taxing the rich at a higher rate, income can be redistributed more evenly. This increases the consumption capacity of lower-income groups who have a higher propensity to consume, thus raising overall consumption through the multiplier effect.
2. Social Security: Establishing a comprehensive system of social security reduces people's fear of insecurity about the future, which encourages them to maintain or increase their consumption expenditure instead of saving excessively. 
3. Easy Credit Facilities: Availability of easy credit facilities for buying consumer durables encourages people to consume more, thus raising the propensity to consume. This acts as an effective anti-depression policy.
4. Wage Policy: Implementing a favorable wage policy that ensures higher wages for workers increases their income and hence their consumption. This can be approached from both short-run and long-run perspectives to stabilize and boost consumption.
5. Urbansiation: Development of new urban areas and colonies increases demand among people due to changes in lifestyle and consumption preferences, thereby raising consumption.
6. Advertisements and Publicity: A well-organized publicity system through press, radio, and television can stimulate consumer awareness and urge to buy, increasing consumption levels.
7. Demonstration Effect: Lower-income individuals often imitate the consumption habits of the wealthy, which increases their consumption expenditure and propensity to consume.
8. Increase in Population: A growing population leads to new and fresh demand for goods and services, thereby raising overall consumption.
9. Development of Means of Transport: Efficient and quick transportation increases access to goods and markets, encouraging higher consumption.