Question

Write notes on Productive Vs Consumption Theory.

Answer 1

Keynes mentioned several subjective and objec­tive factors which determine consumption of a society. However, according to Keynes, of all the factors it is the current level of income that determines the consumption of an individual and also of society.

In other words, marginal propensity to consume is less than one.

1> ΔC/ΔY >0

Since Keynes propounded his theory of consumption there have been significant developments in this field and several alternative theories of consumer behaviour have been put forward.

First, Duesenberry has propounded that consumption expenditure depends on income of an individual relative to incomes of others rather than the absolute size of his own income.