In the short run propensity to consume is stable because this can't be changed in a short period. increase in consumption function also increase output ,employment and income,since increase in consumption function has positive effect in the economy, this has to be increased . in the long run propensity to consume can be increased in the following ways:
1. redistribution of income
government should levy progressive tax on the rich and people with high income and provide various subsidies to the poor people. so, redistribution of income from rich people to poor people will increase the propensity to consume of the poor people.
2. wage policy
increase in wage rate increases the propensity to consume in the long run because daily wage earners are the people with low income. the more the increase in the wage rate, the higher is the consumption of such people. thus, propensity to consume can be increased with the increase in the wage rate.
3. increase in the social security
government can increase the propensity to consume by increasing the social security. unemployment allowances, pension,health insurance, etc. also, increase the consumption function of the people.
4. credit facility
easy and cheap credit facilities will enable the people to purchase durable goods such as motorcycles, televisions, fridges, etc. this will increase the consumption of people. similarly , installment and hire and purchase schemes will also increase the propensity to consume.
5. urbanisation
urbanisation also increase the propensity to consume because of the various modern facilities and necessities the city people will consume More goods and services than the rural people.
6. advertisement and publicity
various advertisements and publicity of goods and services also increase the propensity to consume of the people . newspapers, radio, television, etc. are the media for advertisement and publicity of goods. advertisements and publicity inform the people about the new goods and services and motivate them in consuming such goods and services.
7. development of means of transport
development of various means of transport also increase the propensity to consume of the people. goods produced at one place can be taken to the consumers easily by means of transportation. this will increase the consumption function of the consumers.
1. redistribution of income
government should levy progressive tax on the rich and people with high income and provide various subsidies to the poor people. so, redistribution of income from rich people to poor people will increase the propensity to consume of the poor people.
2. wage policy
increase in wage rate increases the propensity to consume in the long run because daily wage earners are the people with low income. the more the increase in the wage rate, the higher is the consumption of such people. thus, propensity to consume can be increased with the increase in the wage rate.
3. increase in the social security
government can increase the propensity to consume by increasing the social security. unemployment allowances, pension,health insurance, etc. also, increase the consumption function of the people.
4. credit facility
easy and cheap credit facilities will enable the people to purchase durable goods such as motorcycles, televisions, fridges, etc. this will increase the consumption of people. similarly , installment and hire and purchase schemes will also increase the propensity to consume.
5. urbanisation
urbanisation also increase the propensity to consume because of the various modern facilities and necessities the city people will consume More goods and services than the rural people.
6. advertisement and publicity
various advertisements and publicity of goods and services also increase the propensity to consume of the people . newspapers, radio, television, etc. are the media for advertisement and publicity of goods. advertisements and publicity inform the people about the new goods and services and motivate them in consuming such goods and services.
7. development of means of transport
development of various means of transport also increase the propensity to consume of the people. goods produced at one place can be taken to the consumers easily by means of transportation. this will increase the consumption function of the consumers.
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