New Age History and Economics

The Day We See The Truth And Cease To Speak it, Is The Day We Begin To Die. MLK Jr.

Sunday, May 1, 2011

When is consumption bad for the economy?

       THE FREEMEN


Dear Brethren,



When is consumption bad for the economy?

1.When consumers have lost their confidence.
2. When debts are skyrocketing.
3. When marginal propensity to consume is too low. It will make fiscal policy less effective. And we have to be in recession longer.
4. When consumption is not moving in the same direction which it is required by the economy. For examples, consumption of import goods are skyrocketing when the current account deficit is beyond repair.
5. When "Buy American" becomes joking word.
6. When consumers are not health concerned. It is bad for that consumer, someone its love, and health insurance company.

Specific example. Whoever said that American consumers should save the world. It is wrong. They should save America and the dollar.


The law of diminishing return says that if a person consumes a particular commodity again and again without an interval then the utility which he derives from consuming an additional unit of that commodity goes on decreasing. Let me explain this by giving an example. If a person consumes an apple he will get a certain amount of utility but if he goes on consuming more and more apples one after the other without any interval then the utility which he derives from consuming an additional apple will go on decreasing.

Kaps



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