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Chapter 4 (What factors determine consumption (Current income (small…
Chapter 4
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Sustainable consumption
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The sustainable level of consumption is equal to the (constant) labour income plus the real return on the assets
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Durable goods
Durable goods have more of an investment character, e.g. cars, refrigerators and furniture. Such goods last a long time and yield services during. These purchases are a consumer investment and thus, the accelerator effect plays a part in their demand. Hence, purchases are more volatile - consumers with higher income are likely to demand more.
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