related to psychological feelings. Major subjective factors influencing consumption function are given below. Keynes lists eight motives which lead individuals to refrain from spending, they are: . The motive of precaution: To build up a reserve against unforeseen contingencies.
Eg. Accidents, sickness . The motive of foresight: The desire to provide for anticipated future needs. Eg.
Old age . The motive of calculation: The desire to enjoy interest and appreciation. . The motive of improvement: The desire to enjoy for improving standard of living.
. The motive of financial independence . . The motive of enterprise : desire to do forward trading.
. The motive of pride : desire to bequeath a fortune . The motive of avarice : purely miserly instinct Keynes sums up the motives as Precaution, Foresight, Calculation, Improvement, Independence, Enterprise, Pride and Avarice. The Government, institutions and business corporations and firms may also consume mainly because of the following four motives: .
The motive of enterprise: The desire to obtain resources to carry out further capital investment without incurring debt. . The motive of liquidity: The desire to secure liquid resources to meet emergencies, and difficulties. .
The motive of improvement: The desire to secure a rising income and to demonstrate successful management. . The motive of financial prudence: The desire to ensure adequate financial - - Consumption and Investment Functions provision against depreciation and obsolescence and to discharge debt. According to Keynes, the subjective factors do not change in the short run and hence consumption function remains stable in the short period.
B) Objective Factors Objective factors are the external factors which are real and measurable. These factors can be easily changed in the long run. Major objective factors influencing consumption function are: ) Income Distribution If there is large disparity between the rich and the poor, the consumption is low because the rich people have low propensity to consume and high propensity to save. The community with more equal distribution of income tends to have high propensity to consume.
This view has been corroborated by V.K.R.V. Rao. ) Price level Price