consumption, the consumption function - one of the most important concepts of modern economic theory.Different approaches to the justification of the term lead to a very substantial discrepancies understanding of its inner essence.
concept of consumption and savings
saving function and consumption are crucial for understanding the essence of the market economy in its various interpretations.In the most general form of consumption is considered as the amount spent in the State funds, the main purpose of which - the purchase of material objects and the consumption of any service.It is also extremely important point is that these goods and services are used solely to meet the individual and collective material and spiritual needs.
consumption, the consumption function is in very close relationship with the function of savings.She, in turn, is nothing but, as part of the resulting income of certain activities that at this particular moment is still untapped and is a so-called safety cushion for a rainy day.At the same time, some savings can be invested by citizens in different projects, thus turning into investments.That is the effect and interaction of elements of the economy, consumption, investment and savings, and is one of the major issues that occupied the scientists and economists of the XX and XXI centuries.A special role was played by the work of D. Keynes.
main provisions of the theory of JM Keynes
J. Keynes considered one of the most important figures in the economics of the twentieth century.His contribution to the theoretical justification for the different macroeconomic problems marked by a number of national and international awards, as well as the emergence of a special term - "Keynesianism" is used to designate special areas in neoclassical theory.
Keynesian consumption function - is just one of the provisions of its neo-classical concept.The gist of it was reduced, on the one hand, to the fact that any market system priori unstable, and on the other - that we need an active state policy for regulation and intervention in the system.By stimulating demand, the scientist pointed out in his works, the government has an opportunity as soon as possible to overcome the crisis.Consumption, savings and investment play in this case, an extremely important role.
saving function and consumption as integral parts of the formation of effective demand
In his theoretical calculations D. Keynes proceeded from the fact that the main problem of almost any economic theory is to create a balance between supply and demand, and the first should be slightly ahead of the second.In turn, effective demand - it is an important step towards a permanent increase in the level of national income, which is the most important task of any state in a market economy.
Thus, the Keynesian consumption function - is the basis for successful development of society as a whole.A huge role in its proper interpretation and implementation rests with the state.
consumption and its structure
Compared to savings and investment, consumption, consumption function play a much more prominent role in the gross national product of any state.According to recent reports in our country it is just over 50%, while in the United States - about 70%.Thus, consumption - a key indicator of market relations and the degree of influence of the state on economic processes in the country.
consumption patterns usually include all the costs of a particular family.However, to make it easier to analyze the internal structure of consumption throughout the country, usually identify several major groups of goods and services, in terms of acquisition of which the population is divided into several groups.At the same time based on the fact that the set of goods and services purchased each specific family - is unique, so the overall analysis using a so-called model of the consumption function.
Models Engel: the nature and effect
model that describes the function of consumption in economics are called Engel's model, in honor of the famous German statistics the second half of the XIX century E. Engel.
German scientist, formulating its own laws, based on the fact that the group cost of their priority are placed in the following order: food, clothes, apartment (house), transport, health and education services, the accumulated savings.
However, Engel not only identified these groups, but also showed a definite pattern: if the family income for a certain period of time increases, the cost of food will also increase, reducing its share in the total consumption.However, the most rapidly with an increase in revenues should grow savings, since, according to Engel's, they are a group of luxury goods.
Keynesian consumption function: the main factors influencing the choice of priority citizens
D. Keynes was largely agree with the concept of Engel, but gave it a more finished appearance and mathematically verified.According to his teachings, the consumption is determined by the following factors.
Firstly, those revenues that remain after the payment of the citizens of all mandatory taxes and fees to the state.This disposable income - the foundation for future expenses of citizens.
Secondly, the Keynesian consumption function included such an important indicator as the ratio of the level of costs (ie consumption) to total revenue.This factor is called the average propensity to consume, and, according to the scientist, this ratio should gradually decrease with increasing income of citizens.
Finally, thirdly, Keynes specifically introduced such a thing as the ultimate level of the propensity to consume.This ratio shows what proportion of consumption in the cash that the citizen received in excess of their former income.
basic postulates of Keynes
consumption, the consumption function, developed and mathematically proved well-known economist, led to the conclusion that with the growth of household income and increased its spending on consumption.However, and this - a key idea of Keynes, not all the extra income will be spent on consumption, part of it may be in the savings and investment.The main factors influencing this distribution, the scientist took the following:
- consumption - a factor that determines the way of life mostly poor and middle classes.If we are talking about the elite, here almost all the additional income turns into a savings or investment.
- consumption depends not only on presentation of the individual and the family, but also the social environment.It proved that even people with not very high income tend to (at least partially) to buy the things that are acquired middle to higher levels of society acting as a kind of social standard.That is why very often the level of savings from the lower strata far below even what they might be.
- In the case of falling incomes consumption will increase at a much faster rate than it fell in the reverse process.
The main conclusion of these postulates of Keynes is the lack of direct ascending (or descending) the relationship between the increase in household income and consumption growth.
Graphical function
All underlying assumptions and hypotheses Keynes obtained agree well with the schedule of consumption.Schedule of consumption function is a straight line, located at an angle to the x-axis, the value of which is less than 45 °, the more developed market relations in a given society.
virtual point of crossing the expected timetable, under which all proceeds would go to consumption, is a point at which there is no savings, but the family does not make loans.To the right of this function is a zone of positive savings and left - negative, that is, such a person is forced to take out loans in order to secure at least a basic good.
consumption function is given by a line extended to the right side.In order to determine the level of consumption, it is necessary to calculate the distance from the vertical axis to the point in question.At the same time quantification of savings can be calculated from the length of the study conducted to function bisector.
psychological law Keynes
As mentioned above, among other things, the American scientist has entered into a scientific turn the concept of "marginal propensity to consume", which is the quotient of the consumption growth to that of income.It is because of this relationship emerged the famous "psychological law of Keynes."
essence of this law confirms the schedule of consumption - the higher the level of income a particular person or a particular family, the majority of these additional funds goes to savings.The structure of spending can be judged as the wealth of the family, and the level of economic development of the whole society.
This law confirms also formulated in the XIX century, the principle of utility.The utility function of consumption is given by the relationship satisfaction of all the benefits and the total number of acquired material goods and services.The higher the level of income and the degree of usefulness of the acquired items above.
