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"Consumption is determined by Income"
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| Submitted: Thu Sep 04 2003
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"Consumption is determined by Income" Consumption is defined as consumer spending on goods and services over a certain period of time. In this case, disposable income is used as this is the aggregate amount of money a person earns during a given period. There are a number of factors which determine how much a household consumes. The relationship between consumption and these factors is called the consumption function. The most important factor of consumption is disposable income but other factors can bring around significant changes in consumption. One factor of consumption is the amount of wealth a household has. A household is constituted of the general public as distinct from a firm or business. In common parlance the general public is often called consumers Wealth is made up of physical wealth and monetary wealth. Physical wealth is durable items such as cars, houses and furniture whereas monetary wealth is made...
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