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The law of Psychological consumption states
- a)Consumption changes in the same direction as investment
- b)Consumption changes in the opposite direction as income
- c)Consumption changes in the same direction as income
- d)Consumption does not change in the same direction as income
Correct answer is option 'C'. Can you explain this answer?
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The law of Psychological consumption statesa)Consumption changes in th...
The concept of consumption function stems from the
basic psychological law of
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The law of Psychological consumption statesa)Consumption changes in th...
Law of Psychological Consumption
The Law of Psychological Consumption states that consumption changes in the same direction as income. This means that as income increases, consumption also increases and vice versa.
Explanation
The Law of Psychological Consumption is based on the fact that an increase in income leads to an increase in purchasing power. When people have more money, they tend to spend more on goods and services. This leads to an increase in consumption.
On the other hand, a decrease in income leads to a decrease in purchasing power. When people have less money, they tend to spend less on goods and services. This leads to a decrease in consumption.
Moreover, the Law of Psychological Consumption is also influenced by human behavior and psychology. People tend to spend more when they have more money, even if they do not necessarily need the goods or services they are buying. This is known as discretionary spending.
Conclusion
In conclusion, the Law of Psychological Consumption is an important concept in economics that explains the relationship between income and consumption. It helps in predicting consumer behavior and can assist businesses in making decisions regarding pricing, production, and marketing strategies.
The Law of Psychological Consumption states that consumption changes in the same direction as income. This means that as income increases, consumption also increases and vice versa.
Explanation
The Law of Psychological Consumption is based on the fact that an increase in income leads to an increase in purchasing power. When people have more money, they tend to spend more on goods and services. This leads to an increase in consumption.
On the other hand, a decrease in income leads to a decrease in purchasing power. When people have less money, they tend to spend less on goods and services. This leads to a decrease in consumption.
Moreover, the Law of Psychological Consumption is also influenced by human behavior and psychology. People tend to spend more when they have more money, even if they do not necessarily need the goods or services they are buying. This is known as discretionary spending.
Conclusion
In conclusion, the Law of Psychological Consumption is an important concept in economics that explains the relationship between income and consumption. It helps in predicting consumer behavior and can assist businesses in making decisions regarding pricing, production, and marketing strategies.
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The law of Psychological consumption statesa)Consumption changes in the same direction as investmentb)Consumption changes in the opposite direction as incomec)Consumption changes in the same direction as incomed)Consumption does not change in the same direction as incomeCorrect answer is option 'C'. Can you explain this answer?
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