Keynes psychological law of consumption on the basis of survey of five family budget .
Answers
According to Keyens psychological law of consumption, the change in once amount of consumption shall always be less than the varying of income. The reason behind these is, because consumers never increase the amount of expenses in proportionate to their rate of income growth.
Instead of spending the increased part of the individual, rather he or she saves it.
Keynes’ psychological Law of Consumption is a vital tool of financial analysis.
Keynes advocated the essential psychological law of consumption as the basis of the consumption purpose.
The law suggests that there is a propensity on the part of the people to employ on consumption fewer than the full increase of income.
Therefore, this law is called Psychological Law of Consumption.