Question

✌️✌️Ahoy everyone ✌️✌️
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Explain the Keynes psychological law of consumption with diagram?
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Answer 1

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Refers to this attachment....

Answer 2

Answer:

According to keynes Psychological Law of Consumption,the change in consumption is always less than the change in income. This is because the consumers do not spend the whole of the increase in their income on consumption rather; a part of the increase in the income is saved. That is, algebraically:

Delta Y = Delta C +Delta S

Thus, the increase in the consumption can never be more than increase in the income.

Now, you can conduct this study on your own by visiting five households in your locality and asking them about their budgeted savings, consumption and, their family income over last two years. Thereafter, you should make a table specifying their consumption, savings and income in that period and study the table to determine that increase in income leads to a less than proportional increase in consumption due to savings.