TSR Wiki > Study Help > Subjects and Revision > Revision Notes > Economics > Key Points on Consumption and Saving
Consumption
Consumption is the most important single element of AD (typically accounts for between half and two-thirds of Total Final Expenditure)
Permanent Income and Life-Cycle hypotheses
These were developed in 50s and 60s in response to a discrepancy between:
- Consumption function estimated from LR time series data, and
- Much flatter consumption function estimated from SR time series and cross section data.
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