Psychological Law of Consumption
Psychological Law of Consumption Keynes defines Psychological Law of Consumption in terms of, “The fundamental psychological law, upon which we are entitled to depend with great confidence both a priori from our knowledge of human nature and from the detailed facts of experience, is that men are disposed, as a rule and on the average, to increase their consumption as their income increases but not by as much as the increase in the income.” It simply means that Marginal Propensity to consume is positive but less than unity (>0 but <1).
Read more about this topic: Fundamental Psychological Law
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