Question

Answer in detail.

Give an idea about the subjective factors determining consumption function.

Answer 1

Subjective or Psychological Factors: These are internal factors and depend on personal decision. According to Keynes, there are eight subjective motives which prevent an individual from current consumption.
i. Motive of precaution: People save money for the future in order to meet unexpected expenditure.

ii. Motive of foresightedness: People cut down their spending in order to meet future requirements for money. For examples, requirements for higher education, marriage, buying a house etc.

iii. Motive of improvement: Individuals cut down their expenditure to improve their standard of living.

iv. Motive of independence: As per this motive, man saves more in order to depict more power and independence.

v. Motive of pride: Another motive that prevents people from spending is wanting to maintain the same economic stability in the future. Providing some wealth to their future generations or making donations gives them a feeling of pride.

vi. Motive of enterprise: People prevent current consumption and save for the purpose of investing. Under this motive, people save to invest in a profitable enterprise.

vii. Motive of calculation: Under this motive, people save to invest in shares and debentures in order to increase their income.

viii. Motive of avarice: Some people have a habit unnecessarily abstaining from consumption.