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8 May, 2015 - 11:47

The major determinant of consumption is the willingness or propensity to use the real income to buy goods and services. Thus consumption and income are directly related. Other determinants of consumption are the price level, wealth, stock of durables, level of indebtedness and expectations about the future.

The perception of a family's income is what allows it to be confident that it will be able to make the necessary payments or to afford to take out the savings, to buy a car. If it does not feel confident about its level of current and future income, it may want to use the car one more year.