Discuss the limitations of Keynes consumptions function.
Unrealistic concept: Keynes consumptions income or saving income relation was considered unrealistic by critics as this proportion may tend to full with an increase in income.
Unrealistic assumptions: Keynes consumptions function or psychological low of consumption was based on such assumptions as the constancy of psychological and institutional complex, normal conditions and advanced capitalistic economy system. These assumptions can’t be hold valid in real life.
Faulty use of the lerm ‘propensity’: According to critics the lerm ‘propensity’ actualy means the ‘tendency’. The tendency to consume of a community may or may not be line with Keynes analysis.
Excessive emphasis on short term analysis: Keynes was too much preoccupied with the short run consumption income relationship.
Truism: Keynes in his consumption function pointed out that MPC is low in case of the rich. Whereas it is high in case of poor such a phenomenon is known to everyday there was nothing new in it. It was not more than a mere truism.
