What were Keynes's three conjectures about consumption function?

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Keynes's Three Conjectures about Consumption Function

Conjecture 1: The Absolute Income Hypothesis

Keynes proposed that consumption is directly related to absolute income, meaning that as income increases, consumption also increases but by a smaller proportion. This implies that individuals tend to save a portion of their additional income rather than spending it all.

Conjecture 2: The Marginal Propensity to Consume (MPC)

Keynes suggested that individuals consume a fraction of any increase in income, known as the marginal propensity to consume. The MPC is less than one, indicating that not all additional income is spent on consumption. Rather, some amount is saved or used for other purposes.

Conjecture 3: The Stability of Consumption

Keynes hypothesized that in the short run, consumption is relatively stable and less volatile compared to changes in income. This stability is attributed to factors such as habits, expectations, and social norms that influence consumer behavior. However, in the long run, consumption may be more responsive to changes in income and other economic factors.

By understanding these three conjectures, economists can better analyze and predict how changes in income will impact consumption patterns, thereby informing policy decisions and economic forecasts.

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