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Essay / Research Paper Abstract
This 12 page paper looks at the way the consumers make decisions regarding consumption and investment. The first part of the paper considers condition of certainty and uncertainty to look at the way investment and consumption is determined. The paper then goes on to look more specifically at consumption decisions and the way value is measured and applies the concept of utility maximization. The bibliography cites 10 sources.
Page Count:
12 pages (~225 words per page)
File: TS14_TEconsumptd.rtf
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Unformatted sample text from the term paper:
there are also consumer choices to increase some types of consumption, for example, where the goods may be acceptable substitutes for more costly goods (Nellis and Parker, 2000). However, there
are also some forms of consumption that may change little, especially if the goods or services consumed are essential. The consumption decision will also impact decisions regarding savings and investment.
Traditionally during times of uncertainty there may be a preference by consumers to hold back income or capital in order to ensure that they have a financial safety net, otherwise
consumption may be constrained by consumers being less willing to borrow money and repay debt to reduce their liabilities (Nellis and Parker, 2000). Therefore, consumption and investment decisions are
interdependent. There are many ways of considering the way that consumption is determined, from an economic perspective the use of the concept of utility. In economic theory this can be
considered in terms of both certainty and uncertainty. The first consideration is to look at the way the split between consumption and investment is considered and then look at the
way that the resources used for consumption are allocated. When looking at any investment/consumption decision there will be certain common elements whatever the situation, the analysis that listed decision
will involve considering the alternatives and the determination of the criteria of how the choice will be made between the alternatives (Elton et al, 2002). There may be situations where
there is certainty of outcome. This is best illustrated with a fictitious example to demonstrate the way in which certainty case can be contextualised. By looking at a simple problem
as an example the same process can be applied to more complex problems. Consider a consumer/investor who will receive an income of $10,000 over the next two years. Furthermore, that
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