Determinants of Consumption

Other Determinants of Consumption:

However income is the most significant factor that has greater persuades on consumption, there are other factors that influence the tendency to consume. They are:

A. Income distribution

B. Nature and size of wealth sharing

C. Age distribution of population

D. Inflation or price level

E. Government policies

F. Rate of interest

G. Expectations around price, income, and so on.

H. Advertisements

I. Enhancement in the living standard

J. Modifications in cultural values

Aggregate demand comprises of two parts (when you disregard government and external trade) that is, consumption function and investment function. Though, consumption function or MPC stays constant in the short run. Therefore, Keynes placed more emphasis on investment function.

 

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