Test of Keynesian Consumption Function: A Case Study of University of the Punjab

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*Corresponding author: Bilal Amin, Lecture Lahore Leads university, College of Commerce and Accountancy (LUCCA), Pakistan. E-Mail: [email protected]

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Management and Administrative Sciences Review

Volume 4, Issue 5

Pages: 787-800

September 2015

e-ISSN: 2308-1368

p-ISSN: 2310-872X

Test of Keynesian Consumption Function: A Case Study of University of the Punjab

Bilal Amin

Lecture Lahore Leads University, College of Commerce and Accountancy (LUCCA), Pakistan

The purpose of this research paper is to test the Keynes consumption function among the students of University of the Punjab. A Survey is conducted among the students of University of the Punjab.In this research the roles of consumption in economic growth in short run to determine aggregate demand in the economy is discussed. The marginal propensity to consume (MPC) is also define as an empirical metric that quantifies induced consumption, the concept that the increase in personal consumer spending (consumption) that occurs with an increase in disposable income (income after taxes and transfers).A large amount of material has therefore been written regarding the consumption function, many macro-economic policies rely on ability to influence the aggregate demand in the economy without directly increasing government expenditure. The questionnaire included questions related to the consumption pattern of the students like monthly pocket money, monthly consumption and savings etc. The Guardian income and occupation is also included in the survey. The survey shows that two postulates of Keynes hold true for the students of university of the Punjab.

Keywords: Keynesian Consumption Function, MPC, APC

INTRODUCTION

Consumption is define as the total quantity of goods and services that people in the economy wishes to purchase for their immediate need (Nordlund & Österberg, 2000).Consumption is the main component of GDP as it is two third of GDP, so fluctuations in consumption are a key element of boom and recession.

AS Adam smith said “Consumption is the sole end and purpose of all production.”

The household consumption decision is crucial for long run analysis because of its role in economic

growth and in short run to determine aggregate demand in the economy (Throsby, 1994).

As we know that

Y=C+I+G+NX

Consumption is a main component of GDP as the investment, Government Expenditure and the net export of an economy. The decision of production depends on the consumption as producers decide what to produce and how much quantity to produce? The consumption and production in the economy act as a demand and supply forces. The

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consumption shows the demand and production shows the Supply for an economy (Mankiw & Zeldes, 1991).

The consumption is dependent on income level of an individual. The amount left after paying tax is the income of an individual.

C=C(Y-T)

The Consumption rises with the income and rich people consume more than the poor. This is indeed the case and we find ample confirmation of this in empirical data as well. Consumption is important to analyse since it is consumption that determines the economic activity and production level of the economy(Reisch & Røpke, 2004). The Structural changes likes Tax, interest rate, prices are going to impact the consumption pattern. Since consumption determines the health of the economy in many ways, it is important to keep some broad contours of the consumption function in mind.

Consumption has a more complex relationship with income. For every rise in income, consumption might not go up by a rupee. Some of the income should be low. Furthermore as income increase we expect that less and less of additional income will be consumed .This is likely to happen as with increasing more and more of your needs are likely to have been satisfied already so that one would expect lower consumption rate with higher income and a saving rate.

The concept of consumption is one that varies between the academic community, government and between individuals (Daly, 1998). As in the closed economy consumption has also a significant role as it is the main component of GDP.

Y=C+I+G

Carroll (1996) adjusted the data in both economies that is micro economy and macro economy by taking evidence from household income. In U.S they proved that annual marginal propensity to consume is much more than commonly used by macroeconomic models. They credibly anticipated that the aggregate Marginal propensity to consume can differ how the income is distributed among households (Das & Hammer, 2014). The comparison is made on the bases of low wealth, high wealth and on the employed and unemployed. The apparent non-stationary of the (APC) average propensity to consume can be explained by its close

connotation with non-stationary (WY) wealth income ratio based on threshold error correction with regime dependent of amendment towards long run equilibrium (Tullock, 2013). They also originated the APC (average propensity to consume) that respond to long run dis-equilibrium where the speed of adjustment is unequal in so far as being most likely fastest in regime categorized by a high APC(average propensity to consume) and low (WY) Wealth income ratio. (MPC) marginal propensity to consume is significant for calculating the consequence of taxation in consumption, measuring the possibility detected variation in consumption (Perkins, Radelet, Lindauer, & Block, 2012). He also suggested that it is a component of interest elasticity, risk aversion of the value function of wealth. The research analyses the effect of ambiguity on the marginal propensity to consume within the context of the permanent income hypothesis the (MPC) Marginal propensity to consume for a sample of Kansas farms. Sensitivity of MPC (marginal propensity to consume) to the practice of accrual net farm income, net cash farm income, and the inclusion of off-farm income was also observed. The range of short rum (MPC) marginal propensity to consume was calculated from 0.011 to 0.015.

Keynesians consumption function:

A large amount of material has therefore been written regarding the consumption function, many macro-economic policies rely on ability to influence the aggregate demand in the economy without directly increasing government expenditure (Fama & French, 1993). The most famous is John Maynard KeynesGeneral theory of Employment, interest and money in 1936(Keynes, 2006).

John Maynard Keynes, (5 June 1883 – 21 April 1946) was a British economist whose ideas have profoundly affected modern macroeconomics and social liberalism, both in theory and practice. He advocated interventionist economic policy, by which governments would use fiscal and monetary measures to mitigate the adverse effects of business cycles, economic recessions, and depressions. His ideas are the basis for the school of thought known as Keynesian economics, and its various offshoots. The Keynes conjectures are given below:


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MPC (Marginal propensity to consume)

The first and most important Keynes conjectures is the Marginal propensity to consume. The amount consumed out of an additional dollar of income is in between zero and one (Kinsey, 1983). He wrote that the “fundamental psychological law” upon which are entitled to depend with great confidence is that men are disposed ,as a rule and on average ,to increase their consumption, as their income increases, but not by as much as the increase in their income”(Kimball, 1990). That is, when a person earns an extra dollar, he typically spends some of it and save some of it.

This factor of income was named the MPC marginal propensity to consume.

The marginal propensity to consume (MPC) is also define as an empirical metric that quantifies induced consumption, the concept that the increase in personal consumer spending (consumption) that occurs with an increase in disposable income (income after taxes and transfers) (Carroll, Slacalek, & Tokuoka, 2014). For example, if a household earns one extra dollar of disposable income, and the marginal propensity to consume is 0.65, then of that Rupee, the household will spend 65 Paisa and save 35 Paisa.

Mathematically, the marginal propensity to consume (MPC) function is expressed as the derivative of the consumption (C) function with respect to disposable income (Y).

MPC= ΔC/ ΔY

Where ΔC is the change in consumption, and ΔY is the change in disposable income that produced the consumption.

The marginal propensity to consume is measured as the ratio of the change in consumption to the change in income, thus giving us a figure between 0 and 1. The MPC can be more than one if the subject borrowed money to finance expenditures higher than their income. One minus the MPC equals the marginal propensity to save (in a two sector closed economy), both of which are crucial to Keynesian economics and are key variables in determining the value of the multiplier.

Marginal propensity to Save The marginal propensity to save (MPS) refers to the increase in saving (non-purchase of current goods

and services) that results from an increase in income. For example, if a household earns one extra dollar, and the marginal propensity to save is 0.35, then of that dollar, the household will spend 65 rupees and save 35 rupees. It can also go the other way, referring to the decrease in saving that result from a decrease in income. It is crucial to Keynesian economics and is the key variable in determining the value of the multiplier.

Mathematically, the marginal propensity to save (MPS) function is expressed as the derivative of the savings (S) function with respect to disposable income (Y).

MPS=dS/dY

MPS = 1 - MPC

In other words, the marginal propensity to save is measured as the ratio of the change in saving to the change in income, thus giving us a figure between 0 and 1. It is the opposite of the marginal propensity to consume (MPC). In a two sector closed economy.

MPS = 1 - MPC.

APC (Average propensity to consume)

The second conjectures of Keynes consumption function is that the ratio of consumption to income, called the Average propensity to consume (Mayer, 1966). Average propensity to consume falls as income rises(Kuznets, 1955). The increase in income reduces the consumption and increases the savings of an individual.

APC (Decrease) AS Y (Increase)

APC=C/Y

Average propensity to consume (APC) is the percentage of income spent. To find the percentage of income spent APC=C/Y. One needs to0 divide consumption by income, In an economy in which each individual consumer saves lots of money, there is a tendency of people losing their jobs because demand for goods and services will be low(Danziger, Van Der Gaag, Smolensky, & Taussig, 1982). Thus saving as a leakage is an advantage from the savers' point of view, while for the economy as a whole it is a considerable disadvantage.

Sometimes, disposable income is used as the denominator instead, so.


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APC=C/Y-T

Where C is the amount spent, Y is pre-tax income, and T is taxes.

Average propensity to save

The average propensity to save (APS), also known as the savings ratio, is an economics term that refers to the proportion of income which is saved, usually expressed for household savings as a percentage of total household disposable income(Mankiw, 1981). The ratio differs considerably over time and between countries. The savings ratio can be affected by (for example): the proportion of older people, as they have less motivation and capability to save; the rate of inflation, as expectations of rising prices encourage can encourage people to spend now rather than later (monetary base/mass depreciation) (Modigliani & Brumberg, 1954).

The inverse is the average propensity to consume (APC) is the Average propensity to Save (APS).

No role of Interest rate

The third Keynes Conjectures is that Income is the primary determinant of consumption and there is no role of interest rate (Goodfriend, 1991). The classical economist held that higher interest rate encourages savings and discourage consumptions. According to him interest rate has no effect on individual spending and it is relatively unimportant (Galor & Zeira, 1993).

The Three Keynes conjectures can also be written as

C= C +cY

C>0,

0<c<1

Where C is Consumption, Y is disposable income and C is Constant as autonomous consumption and c is the marginal propensity to consume.

This shows that the consumption level is influenced by an autonomous function (C) and a fraction of income (Friedman & Kuttner, 1992). The autonomous figure always is positive and the multiple of income would lie between zero and one, varying according to the individuals in the economy. Keynes reasoned that there is a certain level of consumption that is necessary for individual to stay alive, this is the expenditure on

food health and shelter and other necessities of life (Campbell, Lo, & MacKinlay, 1997).

This consumption function also shown in the diagram below

FIGURE 1 HERE

Another idea to be caused for this theory was that of saving. BY definition all money not spent on consumption, in a two sector economy. The money will be saved or given as a tax; And this tax may be spend as government expenditure. After excluding it from Tax the consumption equation is

C= a+b (Y-T)

RESEARCH METHODOLOGY

The main aim of this research paper is to test the Keynes consumption function among the students of University of the Punjab. A Survey is conducted among the students of University of the Punjab. A questionnaire is attached with the term paper which includes questions related to consumption patterns of the students.The questionnaire included questions related to the consumption pattern of the students like monthly pocket money, monthly consumption and savings etc. The Guardian income and occupation is also included in the survey.

Econometric Methodology

Simple OLS regression has used to measure the MPC and APC of the students of University of the Punjab. Consumption of the students used as a dependent variable and income of the students as independent variable.

SPSS Statistics used for the cross-sectional data of the survey. The data of survey is presented by graphs, Pie-charts and Bar charts.The Sampling in the research paper was random sampling. The department for survey was selected randomly. The number of sample of the students was 100 and the department was selected randomly.

PRESENTATION OF THE DATA

Departments

The departments for survey were chosen randomly in University of the Punjab, a survey was conducted


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by 20 departments in the University of the Punjab. The highest frequencies of 21 students were from Institutes of Social and Cultural Studies and the lowest frequency of 1 student is from Law College, Library Science, Political Science, Social work and South Asian Departments. The Bar-chart and the table Shows the list of 20 Departments with the number of students from whom survey was conducted.

TABLE 1 HERE

Gender of the students

There were 43 male students and 57 female students out of sample of 100 students. The survey was conducted in 20 different departments. The male student’s percentage is 43% and female’s student percentage is 57%.

TABLE 2 HERE

Class Level

The majority of the students belonged to the MA/MSC group; there frequency is 58, with a share of 58%.The BA/BSC group has 40 students with a share of 40%.The MPHIL and any other has 1 student each with a share of 1%.

TABLE 3 HERE

Area of Residence

The area of residence of the students out of 100 is 28 students belonged to the hostels (livening in a private or University hostels) with a share of 28%.And remaining 72 students are day scholars with a share of 72%.

TABLE 4 HERE

Guardian Occupation

The guardian occupation of the student’s show that 35 out of 100 guardians belonged to self-employed, with a share 0f 35%.24 out of 100 belonged to the Public sector with a share of 24%.

The private sector has a share of 21% as 21 out of 100.The minimum amount of sector is any other which includes 20% of the share. Any other sector includes (Landlords, retire workers etc).

TABLE 5 HERE

Guardian Income

The survey revealed that majority of guardian income belong to above 30001 are 31; with a share of 31%.And between20001-30000 are 26, with a share of 26%.The lowest is the range between 500-1000, which is 16.It shows that the students Guardian income is more and higher than 30000.

TABLE 6 HERE

Use of Income

The most interesting area of investigating of survey is the use of income of the students .According to the survey mostly student use their income for study purposes which is 59%.Stundets used their income for food /canteen are 27 with the share of 27%.Mobile usage of the students are 13 with a share of 13%.The any other use of income is only 1%.

TABLE 7 HERE

Percentage of Saved income

The survey indicate that the students percentage of saving is very low and 50% of the students are unable to save their income less than 5%.Their income is either 5% or lower than 5%.Only 4 students saving is 5%.The rate of saving of 10% is only for 22 students.15% saving is for 15 students and 9 students saved their income (pocket money) 20%.

TABLE 8 HERE

Effect of interest Rate

According to the survey Conducted in University of Punjab, Out of 100 students 51 students say that their income is affected by interest rate. And 49 Students says that interest rate has no role in their income. As a result it shows that 51% students are affected by interest rate and 49% are not affected by interest rate.

TABLE 9 HERE

Interpretation and Results

TABLE 10 (A, B & C) HERE

There where total of 100 samples of the students.100 values for the consumption and 100 values for the income.


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RESULTS OF KEYNES CONSUMPTION FUNCTION

MPC (Marginal propensity to consume)

The main aim of this paper is to investigate the three Conjectures of Keynesian Consumption function. As the first postulates tells that MPC (Marginal propensity to consume) is always between zero and one (Aschauer, 1989). To Calculate the MPC of the students of University of the Punjab a Survey was conducted about the monthly consumption and income of the students. The data of consumption and income is attached in the appendix. The MPC of the students Calculated through regression line is 0.778 which is less than zero. The first postulates holds true as it is between zero and one.

0 < 0.778 < 1

As the equation is

C= C +cY

C = 456.423 + 0.778Y

Where C stands for autonomous consumption as 456.423.It means that fixed consumption of the students of University of Punjab is 456.423.This consumption is fixed for the month and no matter what the monthly income of the student is, the consumption of 450 Rupees will take place.

And c stands for the MPC (Marginal propensity to consume) which is less than one and greater than zero. c=0.778.It shows that one unit increase in income will lead to 0.778 unit increase in Consumption.

AS MPC=0.778 so MPS=1-MPC which is 1-0.778=0.222

So Marginal propensity to save is 0.222

The graph below shows the income and consumption of the students. Consumption as dependent variable shows on y-axis and Income as independent variable on X-axis.

TABLE 11 HERE

APC (Average propensity to consume)

The second conjectures of Keynes Consumption function is that average propensity to consume falls

as income rises. The increase in income reduces the consumption and increases the savings. A question was included in the survey is that suppose your income increase by 1000 Rupees then how much you will consume and save from it? As a result the extra consumption and extra income is calculated and APC was calculated. There were two APC, one is before the increment of the 1000 Rupees and other is after the increment of 1000 Rupees. The data of the student’s income and consumption is given in the appendix.

As = APC=Total C/Total Y

Total Consumption= 396900

Total Income=451550

So APC before increase in income is

APC=396900/451550

APC=0.88

APC after increase in income is

APC=455400/551550

APC=0.83

The second postulate of Keynes also holds true for the students of University of the Punjab. As income increases the student APC falls. The APC falls from 0.88 to 0.83. The APS (Average propensity to save) is given below

APS before increase in income is

APS=1-APC

APS=1-0.88

APS=0.12

APS after increase in income is

APS=1-0.83

APS=0.17

As APC decrease from 0.88 to 0.83 which means that Average propensity to consume falls and Average propensity to save rises from 0.12 to 0.17 which means increase in savings.

No role of Interest rate

The third Keynes Conjectures is that Income is the primary determinant of consumption and there is no role of interest rate. The survey shows the results that does not hold true this postulate. Because


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according to the survey out of 100 students 51 students say that their income is affected by interest rate. And 49 Students says that interest rate has no role in their income. As a result it shows that 51% students are affected by interest rate and 49% are not affected by interest rate. The majority of the students are affected by the interest rate which means income is not only primary determinant of consumption.

DISCUSSION AND CONCLUSION

The main aim of this research paper is to test the Keynes consumption function. To test the three conjectures of Keynes a survey was conducted among the students of University of the Punjab. The department was selected randomly to perform the survey. The survey shows that two postulates of Keynes hold true for the students of university of the Punjab. The MPC of the students is calculated as 0.778, which is between zero and one. Keynes concluded that MPC always remain less than one and greater than zero. The autonomous consumption of students is approx. 456 rupees which they have to consume as a fixed expenditure. The regression line sat as under

C=456.423+0.778Y

The second postulates as income increase Average Propensity to consume decrease also holds true for the students that before increasing the income APC was 0.88 and after increasing the income it become less as 0.83. Its shows that consumption decreases after the increase in income.

TullioJappelli and Luigi Pistaferri (2010) conducted a research survey in Italy of household income and wealth that ask consumers how much of an unexpected transitory income change they would consume. They investigated that marginal propensity to consume is 48 percent and there is substantial heterogeneity in the distribution. They also suggested that redistributing 1% of national disposable income from the top to the bottom decile of the income distrubtion would boost total consumption by 0.33%.

John J. Heim (2007) investigated that in Keynesian consumption function current income is asserted to be the main determinants of consumption. He examined the Keynesian consumption function explain 1960-2000 U.S. consumptions patterns. He

also originate that variance explained by the consumption function drops dramatically when multiyear average incomes are substituted for the Keynesian current income variable. The small amount suggests that there may be a small portion of the U.S. population whose consumption decision follow more complex formulations suggests by the permanent income and life cycle hypothesis (Pigou, 2013). Usually interactive principles rather than maximizing principles emerge from textual analysis as the microeconomic foundation for Keynes’s consumption theory. They also suggested that the probability of foundation a Keynesian-type aggregate consumption function on the beginning of the principles primary existing behavioral models (Pigou, 2013). They analysis the aggregate consumption grounded on behavioral principles is possible, allows for better representation of reality itself, and is more consistent with Keynes’s consumption theory. As no research is a last word because all research leads to a new beginning so more work should be done to develop consumption function properties; more behavioral principles need to be inspected (Perkins et al., 2012). The third postulates which is income is the primary determinant of consumption and there is no role of interest rate which is cannot be tested empirically in our analysis for the unavailability of data.

REFERENCES

Aschauer, D. A. (1989). Is public expenditure productive? Journal of monetary economics, 23(2), 177-200.

Campbell, J. Y., Lo, A. W.-C., & MacKinlay, A. C. (1997). The econometrics of financial markets (Vol. 2): princeton University press Princeton, NJ.

Carroll, C. D. (1996). Buffer-stock saving and the life cycle/permanent income hypothesis: National Bureau of Economic Research.

Carroll, C. D., Slacalek, J., & Tokuoka, K. (2014). The distribution of wealth and the marginal propensity to consume.

Daly, H. E. (1998). Consumption: The economics of value added and the ethics of value distributed. The business of consumption.


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Danziger, S., Van Der Gaag, J., Smolensky, E., & Taussig, M. K. (1982). The life-cycle hypothesis and the consumption behavior of the elderly. Journal of Post Keynesian Economics, 208-227.

Das, J., & Hammer, J. (2014). Quality of primary care in low-income countries: facts and economics. Annu. Rev. Econ., 6(1), 525-553.

Fama, E. F., & French, K. R. (1993). Common risk factors in the returns on stocks and bonds. Journal of Financial Economics, 33(1), 3-56.

Friedman, B. M., & Kuttner, K. N. (1992). Money, income, prices, and interest rates. The American Economic Review, 472-492.

Galor, O., & Zeira, J. (1993). Income distribution and macroeconomics. The review of economic studies, 60(1), 35-52.

Goodfriend, M. (1991). Interest rates and the conduct of monetary policy. Paper presented at the Carnegie-Rochester conference series on public policy.

Keynes, J. M. (2006). General theory of employment, interest and money: Atlantic Publishers & Dist.

Kimball, M. S. (1990). Precautionary saving and the marginal propensity to consume: National Bureau of Economic Research.

Kinsey, J. (1983). Working wives and the marginal propensity to consume food away from home. American Journal of Agricultural Economics, 10-19.

Kuznets, S. (1955). Economic growth and income inequality. The American Economic Review, 1-28.

Mankiw, N. G. (1981). The permanent income hypothesis and the real interest rate. Economics Letters, 7(4), 307-311.

Mankiw, N. G., & Zeldes, S. P. (1991). The consumption of stockholders and nonstockholders. Journal of Financial Economics, 29(1), 97-112.

Mayer, T. (1966). The propensity to consume permanent income. The American Economic Review, 1158-1177.

Modigliani, F., & Brumberg, R. (1954). Utility analysis and the consumption function: An interpretation of cross-section data. Franco Modigliani, 1.

Nordlund, S., & Österberg, E. (2000). Unrecorded alcohol consumption: its economics and its effects on alcohol control in the Nordic countries. Addiction, 95(12s4), 551-564.

Perkins, D. H., Radelet, S., Lindauer, D. L., & Block, S. A. (2012). Economics of development.

Pigou, A. C. (2013). The economics of welfare: Palgrave Macmillan.

Reisch, L. A., & Røpke, I. (2004). The ecological economics of consumption: Edward Elgar Publishing.

Throsby, D. (1994). The production and consumption of the arts: a view of cultural economics. Journal of Economic Literature, 1-29.

Tullock, G. (2013). Economics of income redistribution: Springer Science & Business Media.


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APPENDIX

Table 1: The table of 20 Departments with the number. Of students from whom survey was conducted.

Department

Frequency

Percent Valid Percent

Cumulative Percent

Valid

Biochemistry 12 12.0 12.0 12.0

CEET 3 3.0 3.0 15.0

Chemistry 3 3.0 3.0 18.0

Electrical Engineering 5 5.0 5.0 23.0

Gender Studies 9 9.0 9.0 32.0

Geography 2 2.0 2.0 34.0

Hailey College 3 3.0 3.0 37.0

History 1 1.0 1.0 38.0

Institutes of Social and Cultural Studies

21 21.0 21.0 59.0

Law College 1 1.0 1.0 60.0

Library Science 1 1.0 1.0 61.0

Mass Communication 2 2.0 2.0 63.0

Mathematics 2 2.0 2.0 65.0

Pakistan Studies 2 2.0 2.0 67.0

Political science 1 1.0 1.0 68.0

Social Work 1 1.0 1.0 69.0

Sociology 8 8.0 8.0 77.0

South Asian Center 1 1.0 1.0 78.0

Statistics 11 11.0 11.0 89.0

Zoology 11 11.0 11.0 100.0

Total 100 100.0 100.0


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Table 2: Gender of students

Table 3: Class Level

Class Level

Frequency


Cumulative Percent

Valid

BA/BSc 40 40.0 40.0 40.0

MA/Msc

58 58.0 58.0 98.0

MPhill 1 1.0 1.0 99.0

Any Other

1 1.0 1.0 100.0

Total 100 100.0 100.0

Table 4: Area of Residence

Gender of the Students

Frequency


Cumulative Percent

Valid

Male 43 43.0 43.0 43.0

Female 57 57.0 57.0 100.0

Total 100 100.0 100.0

Area of Residence

Frequency


Cumulative Percent

Valid Hostelite 28 28.0 28.0 28.0

Day Scholars

72 72.0 72.0 100.0

Total 100 100.0 100.0


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Table 5: Guardian Occupation

Table6: Guardian Income

Guardian Occupation

Frequency Percent Valid Percent

Cumulative Percent

Valid Public sector 24 24.0 24.0 24.0

Private sector 21 21.0 21.0 45.0

Self Employed 35 35.0 35.0 80.0

Any other 20 20.0 20.0 100.0

Total 100 100.0 100.0

Guardian Income


Cumulative Percent

Valid 5000-10000 16 16.0 16.0 16.0

10001-20000 27 27.0 27.0 43.0

20001-30000 26 26.0 26.0 69.0

above 30001 31 31.0 31.0 100.0

Total 100 100.0 100.0


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Table 7: The use of Income

Table 8:Effect of Interest rate

Tabel 9 : Percentage of savings

Use of Income

Frequency Percent

Valid Percent

Cumulative Percent

Valid Study purpose

59 59.0 59.0 59.0

Food/Canteen 27 27.0 27.0 86.0

Mobile 13 13.0 13.0 99.0

Any other 1 1.0 1.0 100.0

Total 100 100.0 100.0

Effect of interest rate

Frequency


Cumulative Percent

Valid

Yes 51 51.0 51.0 51.0

No 49 49.0 49.0 100.0

Total 100 100.0 100.0

% of Saved income


Cumulative Percent

Valid Less than 5% 50 50.0 50.0 50.0

5% 4 4.0 4.0 54.0

10% 22 22.0 22.0 76.0

15% 15 15.0 15.0 91.0

20% 9 9.0 9.0 100.0

Total 100 100.0 100.0


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Table 10 (A, B&C) Interpretation and Results

Variable Processing Summary

Variables

Dependent Independent

Consumption by Students

Income of Student

Number of Positive Values 100 100

Number of Zeros 0 0

Number of Negative Values 0 0

Number of Missing Values

User-Missing 0 0

System-Missing 0 0

Case Processing Summary

N

Total Cases 100

Excluded Casesa 0

Forecasted Cases 0

Newly Created Cases

0

a. Cases with a missing value in any variable are excluded from the analysis.


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Figure 1: The keynesian consumption

Model Summary and Parameter Estimates

Dependent Variable:Consumption by Students

Equatio

n

Model Summary Parameter Estimates

R Square F df1 df2 Sig. Constant b1

Linear .774 334.993 1 98 .000 456.423 .778

The independent variable is Income of Student.

Test of Keynesian Consumption Function: A Case Study of University of the Punjab

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