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- Title
On the Equivalence of Community Indifference and the Aggregate Consumption Function.
- Authors
Melvin, James R.
- Abstract
The article examines the correlation between community indifference and aggregate consumption function. There exist in the economic literature two quite different types of macroeconomic models; the Keynesian unemployment model and the classical model employed in trade theory. As both are aggregate models, both have the question of the conditions under which the various central parameters of the two can be aggregated. The consumption functions for individuals written as functions of income can be aggregated if and only if (a) the consumption functions for all individuals are linear, and (b) all individuals have the same marginal propensities to consume. In the Keynesian model the individual consumer is seen to allocate his income between present consumption and future consumption or, in other words, between present consumption and savings. He is thus viewed as having a utility function whose arguments are consumption and savings, which he attempts to maximize subject to his personal disposable income and given prices. In a Keynesian model the utility function is an intertemporal one relating present and future consumption, while in the traditional trade model the utility function concerns two (or more) goods at a particular point in time.
- Subjects
CONSUMPTION (Economics); MACROECONOMICS; KEYNESIAN economics; INCOME; PRICES
- Publication
Economica, 1974, Vol 41, Issue 164, p442
- ISSN
0013-0427
- Publication type
Article
- DOI
10.2307/2553355