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Underconsumption

Definition

In underconsumption theory in economics, recessions and stagnation arise due to inadequate consumer demand relative to the amount produced. It means that there is an overproduction and a demand crisis. The theory formed the basis for the development of Keynesian economics and the theory of aggregate demand after the 1930s.

What is 'Underconsumption'

The purchase of goods and services at levels that fall below the available supply. Underconsumption as an economic theory describes a situation where recession and stagnation occurs in reaction to inadequate consumer demand in relation to the amount (of a particular good or service) produced. Underconsumption theories date back hundreds of years and have been largely replaced by modern Keynesian economics and the theory of aggregate demand (the total demand for goods and services in the economy at a particular time and price level).

Explaining 'Underconsumption'

Modern economic theories find that inadequate consumer demand does not automatically cause a recession because other factors – including private fixed investments in factories, machines and housing, government purchases and exports – may counteract this situation.


Further Reading


Asia's financial crisis, speculative bubbles, and under-consumption theory
www.tandfonline.com [PDF]
One hundred and ten years ago, AF Mummery and JA Hobson wrote," the East-end problem, with its concomitants of vice and misery, is traced to its economic cause, and that this economic cause is the most respectable and highly extolled virtue of thrift"[Mummery …

Global imbalances, under‐consumption and over‐borrowing: The state of the world economy and future policiesGlobal imbalances, under‐consumption and over‐borrowing: The state of the world economy and future policies
onlinelibrary.wiley.com [PDF]
One hundred and ten years ago, AF Mummery and JA Hobson wrote," the East-end problem, with its concomitants of vice and misery, is traced to its economic cause, and that this economic cause is the most respectable and highly extolled virtue of thrift"[Mummery …

Underconsumption, over-investment and the origins of the Great DepressionUnderconsumption, over-investment and the origins of the Great Depression
journals.sagepub.com [PDF]
One hundred and ten years ago, AF Mummery and JA Hobson wrote," the East-end problem, with its concomitants of vice and misery, is traced to its economic cause, and that this economic cause is the most respectable and highly extolled virtue of thrift"[Mummery …

Underconsumption, Distribution Gap and the Perfection of Taxation System <span style=[J]' src='/thumbnails/?img=http%3A%2F%2Fen.cnki.com.cn%2FArticle_en%2FCJFDTotal-YNCM200904014.htm' />Underconsumption, Distribution Gap and the Perfection of Taxation System [J]
en.cnki.com.cn [[J]' href='https:/api.miniature.io/pdf?url=en.cnki.com.cn%2FArticle_en%2FCJFDTotal-YNCM200904014.htm'>PDF]
One hundred and ten years ago, AF Mummery and JA Hobson wrote," the East-end problem, with its concomitants of vice and misery, is traced to its economic cause, and that this economic cause is the most respectable and highly extolled virtue of thrift"[Mummery …

Under-consumption, trade surplus, and income inequality in ChinaUnder-consumption, trade surplus, and income inequality in China
www.sciencedirect.com [PDF]
One hundred and ten years ago, AF Mummery and JA Hobson wrote," the East-end problem, with its concomitants of vice and misery, is traced to its economic cause, and that this economic cause is the most respectable and highly extolled virtue of thrift"[Mummery …

Under-consumption and the accumulation motiveUnder-consumption and the accumulation motive
journals.sagepub.com [PDF]
One hundred and ten years ago, AF Mummery and JA Hobson wrote," the East-end problem, with its concomitants of vice and misery, is traced to its economic cause, and that this economic cause is the most respectable and highly extolled virtue of thrift"[Mummery …

Inequality, Surplus Capital & Underconsumption: A Contemporary Analysis of JA Hobson's Economic Theory of New ImperialismInequality, Surplus Capital & Underconsumption: A Contemporary Analysis of JA Hobson's Economic Theory of New Imperialism
papers.ssrn.com [PDF]
One hundred and ten years ago, AF Mummery and JA Hobson wrote," the East-end problem, with its concomitants of vice and misery, is traced to its economic cause, and that this economic cause is the most respectable and highly extolled virtue of thrift"[Mummery …

Underconsumption, capitalist investment and crisis: a reply to SardoniUnderconsumption, capitalist investment and crisis: a reply to Sardoni
www.elgaronline.com [PDF]
One hundred and ten years ago, AF Mummery and JA Hobson wrote," the East-end problem, with its concomitants of vice and misery, is traced to its economic cause, and that this economic cause is the most respectable and highly extolled virtue of thrift"[Mummery …



Q&A About Underconsumption


What does underconsumption describe?

Underconsumption describes a situation where recession and stagnation occurs in reaction to inadequate consumer demand in relation to the amount produced.

When did underconsumption theories first appear?

Underconsumption theories date back hundreds of years.

Who developed modern economic theories on underconsumption?

Keynesian economics replaced most earlier economic theories including those on under- consumption.

How do modern economic theories view inadequate consumer demand?

Modern economic theory finds that inadequate consumer demand does not automatically cause a recession because other factors may counteract this situation.

What is the definition of underconsumption?

The purchase of goods and services at levels that fall below the available supply.

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