Vol: 14, Issue: 1 2024

Page: 014-021

Permanent Income Hypotheses and Life Cycle Income Hypotheses to Study Consumption Behavior

Dr. Suhasini Parashar

http://doi.org/10.37648/ijtbm.v14i01.002

Behavioral economists introduced that individuals find it not easy to plan for the future, which leads them to save too little to maintain their level of consumption during work time and after it. Consumption for consumers depends on financial wealth and savings at the micro and macro levels. There are various functions within the area of economics and forecast changes by variables that affect consumption, these are income, taste, and preference. The J. M. Keynesian view (since 1936) of the Absolute Theory of Consumption for consumption- income relationship, as money in a country is spent overall by consumers. The contemporary theory of consumption was developed independently by James Duesenbery's (1949) Relative Income Hypotheses, by Milton Friedman (1957) as the Permanent Theory of Consumption, and by Franco Modigliani (1957) as the Life Cycle Theory of Consumption. This article focuses on, studying consumption behavior to explain the psychology of consumers in absolute terms, relative income hypotheses family to family, permanent and long-life effect of income on consumption behavior based on real income under an uncertain environment in the modern view.