The Accelerator Principle

The Accelerator Principle The origin of accelerator principle can be traced back in the writings of Aftalion ( ), Hawtrey ( ) and Bickerdike( ). However, the systematic development of the simple accelerator model was made by J.M.Clark, in . It was further developed by Hicks, Samuelson and Harrod in relation to the business cycles. . . . Meaning A given increase in the demand for consumption goods in the economy generally leads to an accelerated demand for machineries (investment goods). Accelerator is the numerical value of the relation between an increase in consumption and the resulting increase in investment. ΔI = Change in investment outlays (Say ) ΔC = Change in consumption demand (Say ) The accelerator expresses the ratio of the net change in investment to change in consumption.