Research on Two Economic Laws of Household Consumption Function: A Case of Kenya

The paper investigates two economic laws of
household consumption over the 1960 to 2020 period by
taking Kenya as a case study and using the generalized
least (GLS) method. The two laws are: (a) The household
marginal propensity to consume (MPC) in the short run
is not significantly different from 0.43. (b) In the long
run the household MPC is not significantly different
from the positive square root of 0.43. These two laws fall
within the campus of the Keynesian consumption
function. Empirical findings from fifteen consumption
models indicate that values of the long run MPC in
Kenya during the aforementioned period were around
0.66; and were not significantly different from value of
0.65901. Meanwhile, in the short run the MPC in Kenya
during the given period was 0.431; and was not
significantly different from 0.4343. The findings could be
due to the following facts: (a) The short run MPC is the
product of average propensity to consume (APC) and
long run MPC. (b) In the long run values of the
respective APC and MPC tend to be equal to each other.
The implication of the findings is that in the world, the
MPC tends to move towards a common global
equilibrium, for the simple reason that human beings
often tend to have similar demands and consumption
pattens.