Economics · Consumption Theories
Match the consumption theory (P, Q, R, S) with its key distinguishing feature: (P) Absolute Income Hypothesis (Q) Permanent Income Hypothesis (R) Life Cycle Hypothesis (S) Relative Income Hypothesis
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1P → APC falls in LR; Q → Ratchet effect; R → C = kYp; S → Consumption smoothing
- 2P → Lifetime wealth maximization; Q → Demonstration effect; R → C = kYp; S → APC > MPC
- 3P → C = kYp; Q → APC > MPC; R → Demonstration effect; S → Proportional LR consumption
- 4P → Non-proportional SR consumption (APC > MPC); Q → C = kYp (proportional LR); R → Consumption smoothing over lifetime; S → Ratchet effect and demonstration effect✓
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P → Non-proportional SR consumption (APC > MPC); Q → C = kYp (proportional LR); R → Consumption smoothing over lifetime; S → Ratchet effect and demonstration effect
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