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Questions tagged [consumption]

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9
votes
6answers
897 views

Piracy/File sharing - Why aren't songs, movies or books given for free?

Why aren't songs, movies or books given for free (+ads)? i. Every minute, people are pirating and there is no stopping that. If people see 0.99 for a song on iTunes and 0.00 for a song on a torrent ...
8
votes
5answers
3k views

How does a reduction in consumer spending in favour of consumer saving, affect economic activity?

Let's say our government runs an advertising campaign, encouraging its citizens to reduce spending money on consumer items, and instead save more money. Let's say the campaign is successful, and ...
7
votes
1answer
236 views

What was happening in Madagascar during 1971-1996?

In the course of my research I have been examining these days macroeconomic time series for per capital household consumption, using the databank of the WorldBank. The unit of measure was constant ...
6
votes
1answer
475 views

Saturation of durable goods

It seems one factor ignored (or is it?) in economic theory is saturation of durable goods. By this I mean the fulfillment of fixed need for durable goods. We can imagine income to be divided between ...
5
votes
2answers
66 views

Is there an economically sound way to decide between buying media or a streaming subscription?

How can a consumer (like myself) decide on whether they should pay for a music streaming service based on economic reasoning? Assumptions: The budget allows paying for a € 10/Month music ...
5
votes
1answer
158 views

What are the economic benefits of SLAPP in file sharing/piracy?

Spin-off from Piracy/File sharing - Why aren't songs, movies or books given for free? What are the economic benefits of SLAPP in or out of file sharing/piracy? There's a comment in above link ...
4
votes
1answer
102 views

Lifecycle Consumption Models and Dispersion in Consumption

Lifecycle models base on the assumption that households want to maximize their consumption and at the same time insure themselves against income shocks. However, there is a lot of (c.p.) consumption ...
4
votes
2answers
157 views

Re-evaluation of Consumer Price Index (C.P.I.) weights

This might be a very trivial question, however I can't seem to find a very useful answer for this. Problem: How are the weights of the various household items in the Consumer Price Index (C.P.I.) ...
3
votes
1answer
118 views

Why CPI differs so much from consumption deflator?

Why are the two series so different for the US? Data is here: https://fred.stlouisfed.org/graph/?g=lqVJ and photo added below: Private consumption in GDP should include all items consumer by ...
3
votes
1answer
98 views

Why is there consumption sharing in Arrow-debreu time-zero complete markets trading model?

Specifically, I am looking at this paragraph ...
3
votes
2answers
78 views

Impact of a reduction of distortions in a flat consumption tax

I ask about the survey results of some prominent Australian economists shown here (Which is a similar Australian-centric version of the very interesting IGM Forum Surveys). The results of the survey ...
3
votes
0answers
95 views

Europe not self-sufficient in terms of food requirements and consumption?

An acquaintance once told me that Europe is not self-sufficient in terms of food consumption as it does not have enough farmland and farmers to produce enough for all its people, especially in terms ...
2
votes
2answers
53 views

Market baskets: cross-border comparisons

The concept of a market or consumer basket is quite intuitive. I assume a market basket for a given country tells for which goods an average person spends how much of her money. To be able to compare ...
2
votes
2answers
502 views

Preference for consumption smoothing and actual smoothing

The typical dynamic consumption-saving under certainty model can be written as: $$ \max V(c)=\sum_{t=1}^{T} \beta^{t-1}\; u(c_t) $$ Subject to the intertemporal budget constraint $$ \sum_{t=1}^{T}\...
2
votes
1answer
130 views

Precautionary Savings Two-Period model with a second period quadratic utility function

So preferences are defined as $u(c_0)+Ev(c_1)$ Both utility functions are strictly increasing, concave, and twice differentiable. I understand in the setting of $u(c_0)+Eu(c_1)$ when $u(c_0)$ is ...
2
votes
1answer
19 views

Physical goods in a typical household

Estimating how much of physical goods a somehow typical person or household owns today (say in the Western world, compared to former times) is not so easy I guess, but there is one single number that ...
2
votes
1answer
337 views

Log-linearisation Euler Consumption Equation

I am trying to log-linearize the Euler consumption equation in Gali's book. He says: A log-linear approximation of $Q_{t}= \beta E_{t}[(\frac{C_{t+1}}{C_{t}})^{-\sigma}(\frac{Z_{t+1}}{Z_{t}})(\frac{...
2
votes
1answer
29 views

Why does strictly Walrasian demand with quasi-concave utility function mean that the walrasian demand having only one single consumption bundle?

In the context of Walrasian demand: Suppose u is continuous, satisfies local nonsatiation, and is strictly quasi-concave, each $w(p, x)$ contains a single consumption bundle. The proof I got from a ...
2
votes
1answer
74 views

Does Household final consumption Expenditure include Consumption expenditure of Imported Goods

From World Bank, I got the Household final consumption Expenditure for many countries across time. I wonder if this consumption includes Consumption expenditure of Imported Goods / Import Volume? If ...
2
votes
1answer
47 views

How to prove that GDP grows at the same rate as consumption on Lab Equipment Model?

I'm studying the Lab Equipment Model (Barro-Sala-i-Martin, Chapter 6). I'm having trouble when trying to prove that every variables grows at the same rate as consumption. I was able to prove that $\...
2
votes
2answers
126 views

Reverse of broken window fallacy for file sharing/piracy

Adult Swim roughly brings forward the following argument in the video 'film piracy feeds babies': While jobs may be lost in the movie or music industry, they might be created in another. Money that ...
2
votes
1answer
113 views

What are the widescale economic ramifications of people holding onto their money instead of spending it?

Pretty simple question: people get rich by saving more money than they spend. What are the implications of people holding onto their money instead of spending it? Do rich people save more money (...
2
votes
2answers
75 views

Can Autonomous Consumption be Greater than Income of individual?

Autonomous consumption is done either through past savings or by borrowing money or selling asset to have minimum consumption in order to survive. So can autonomous consumption be greater than our ...
2
votes
0answers
55 views

What would happen if there was a one-time redistribution of wealth from the wealthiest 1% to the other 99% of people in the US? [closed]

If you think this is going to lead to answers which are too speculative, let me know, but I think it should be possible to at least make some strong educated guesses... What would happen if there was ...
2
votes
0answers
45 views

The effect of structural unemployment on revenue from value added tax

Bill Gates and European countries have shown favor for consumption/VAT taxes. The arguments given by proponents are often something along the lines that "we know how to tax certain items more than ...
2
votes
0answers
233 views

Fisher Separation with negative interest rate

In class we discussed Fisher Separation which states that the investment decision is independent of the financing decision. The optimality conditions are that MRS = MRT = (1+i) (i = interest rate). ...
1
vote
2answers
134 views

What are some of the economic arguments for gender-neutral marriage?

What are some of the economic arguments for same-sex or gender-neutral marriage (GNM)? Which arguments have merit, don't have merit or have yet to be decided/tested? For example, it is hypothesized ...
1
vote
1answer
133 views

Effect of changing Non Labor Income on Consumption-Leisure problem

Given a Utility function $U(c,l) = c - \frac{1}{2}l^2$ , where $c$ is the consumption and $l$ is the number of hours of labour. Let $L$ be the maximum amount of labor, so the amount of leisure is $L - ...
1
vote
1answer
74 views

Is the study of the volunteer sector inappropriate for a labour economist?

In the basics of labour economics the driving factor for increase in labour supply (for the workers in a given market) is increase in wages. The volunteer sector consists of general and skilled ...
1
vote
1answer
3k views

How does one calculate an optimal consumption bundle if the MRS only contains one variable?

For example, say the MRS has simplified to the form $MRS(x,y) = -y$, given a utility function \begin{equation*} U(x, y) = e^{(x + ln(y))^{1/3}} \end{equation*} With a budget line of, say, $2x + y = ...
1
vote
1answer
114 views

Will the goods market be in equilbrium along the AD curve?

This is a question which was asked in the entrance to Jawaharlal Nehru University's (New Delhi) entrance for their post-grad program specializing in International Economics in 2014. Which of the ...
1
vote
1answer
390 views

Liquidity trap and consumers' reaction to an increase in money supply

I've understood that when the nominal interest rate reaches the zero lower bound there is nothing that the monetary policy can do to increase the output level of a certain economy. Because $i=0$, no ...
1
vote
1answer
14 views

Why salaries counted under Government expenditure in GDP

In the expenditure approach of GDP calculation, why are government employee's salary counted under Government approach while for private firms, we don't count salaries. I am unable to understand if ...
1
vote
1answer
36 views

Does higher tax on luxury goods does more harm than benefit?

I was studying Fiscal policy and I came across measures to reduce income inequality by using fiscal tools. One of the tool mentioned in that was - Higher taxes on luxury goods This makes sense that ...
1
vote
1answer
79 views

How Do Imports Affect GDP

Lets say the U.S. imports a brand new Ferrari that costs $600,000. I know that it would take away from the U.S. GDP since it's considered an import. However, if a consumer buys that Ferrari from the U....
1
vote
1answer
61 views

Why do we model that higher government involvement increases output?

I have just read about the "real intertemporal" model of a macroeconomy in Macroeconomics by Stephen Williamson. I am concerned about how it says any increase in government spending, even if it is ...
1
vote
1answer
110 views

Why does 'government consumption'in NK models not add to utility

In almost all NK models public government consumption (like coastal defences) or private government consumption (like primary and secondary education) is by default 'wasteful'. Government consumption ...
1
vote
1answer
51 views

Are all fixed capital public goods?

fixed capital: any kind of real or physical capital (fixed asset) that is not used up in the production of a product public goods: goods that are non-rival and non-excludable in consumption Both of ...
1
vote
0answers
64 views

What is Economic Interpretation of three nonlinear equations?

I have the following nonlinear system $w$ is wealth $c$ is consumption $r(w)$ is gross return on wealth $a,b, d$ are parameters which are strictly positive and fixed. $$\dot{w} =r(w)w-c$$ $$\...
1
vote
0answers
14 views

Relationship b/w consumption & increase in interest rate

Please help me clarify this- Case 1 - If interest rates increase then people will save more to reap the benefits and will cut down on their consumption(C) so Consumption will fall. Case 2 - Due to ...
1
vote
0answers
42 views

What is the trade-off between? Consumption and Leisure or Income and Leisure?

When first presenting the utility function and its arguments, textbooks typically start by stating that utility is a function of consumption and leisure. See for example https://sites.hks.harvard.edu/...
1
vote
2answers
65 views

How is the Euler Equation for Consumption derived from from intertemporal budget constraint and lifetime utility function in basic macroeconomics

I suspect that what I'm actually asking here is just a basic calculus question, which I have overwrought, but I wanted to ask it here to make sure before taking it to SEMaths. In the Jones ...
1
vote
1answer
63 views

Consumption smoothing in RBC Model

I have the following inter temporal utility function: $U(t)=(\frac{s(t)}{1-\sigma})(c_t/c_{t-1}^\gamma)^{(1-\sigma)} - \chi*h(t)$ where $h(t)$ is the hours worked. I know that gamma is responsible ...
1
vote
1answer
146 views

Why does capital initially reduce and then rise with an anticipated future decrease in taxes in the RCK model?

Consider the version of the RCK model where there is a government that runs a constant balanced budget. At $t_0$, the economy is in steady state, with constant tax $T_{old} > 0$ Then, at $...
1
vote
1answer
17 views

if all income is spent on consumption how will it change or affect the economy [closed]

Imagine all incomes being spent on consumption would such a system be in a position of no change.
1
vote
1answer
38 views

Does lowering consumption help reduce inflation rates?

My country has a whopping 25% annual inflation rate. As far as I know, high inflation implies higher consumption rates, but I was hearing lately that consumption is actually lowering, while inflation ...
1
vote
0answers
4k views

What's the difference between the Life Cycle Hypothesis and Permanent Income Hypothesis?

Would it be correct to say that the Permanent Income Hypothesis (PIH) stipulates that current consumption decisions are made based on future income projections/expectations, while the Life Cycle ...
1
vote
0answers
119 views

Consumer's maximization problem

I am an undergrad trying to learn the basics of NK models (on my own) and I am having some difficulties understanding the derivation of certain equations. So we have the representative household ...
1
vote
1answer
89 views

Capital Asset Pricing Modeling for Consumption

Suppose Asset $A$ has a variance of 7 and its returns are negatively correlated with consumption, while Asset $B$ has a variance of 3 and its returns are uncorrelated with consumption. According to ...
1
vote
0answers
62 views

Competition vs. cooperation [closed]

Why has competition evolved to be the leading principle of market based economies? Can this sustain in the long run? I am thinking about cooperation as a better principle of doing things in the long ...