Consumption Function Theory and Income Hypothesis

Consumption Function Theory and Income Hypothesis:

In accordance with consumption theory and income hypothesis in Iranian school of economic thought, determination of exact place and size of consumption and income of families is impossible even if we are talking about the permanent income.

First explanation: Ultimate desire for consumption in the economy of developed countries and under developing countries is not a fixed amount through passage of time. Increase in population and difference in consumption desire of families has impact on that.

Second explanation is that based on the hypothesis of income, the consumption is not a function of permanent income. However, it is related to the foresight and an ethical and social framework.

 

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