Submit your papersSubmit Now
For Enquiries: [email protected]
IIARD LogoIIARD
📄 Download Paper

Theory of the Consumption Function and Analysis of Impact of Consumption on the Nigerian Economy: A Specious Argument

Rex Oforitse Aruofor, Ph.D, Daniel Risiagbon Ogbeide, Ph.D

Abstract

Over the years, practitioners have come out with various economic theories about the workings of an economy and one of these theories is the theory of the consumption function. A consumption function is an economic model that describes the relationship between a household's spending (consumption) and its disposable income. It is a foundational concept in macroeconomics, famously introduced by John Maynard Keynes, that suggests consumption is a function of income. Several types of Consumption Functions have been proposed in the literature to include the Absolute Income, Relative Income, Permanent Income, and Life Cycle theories but they all belong to the realms of partial analysis. Consumption is the total income spent on all commodities and therefore not limited to households alone. The theory of Ecostatometrics assumes that in the real-world situation, every economic variable or subsystem depends on and is depended upon by other variables or subsystems and that the true structure of an economy is so complex that economic theory will be self-defeating. The theory of Consumption and the Consumption function, is a misnomer and an oversimplification of a more complex situation. This could be the result of poor understanding of the socio-economic system or to the limitations of the existing planning tool kits or both. This study applies the Total Differential Systems Modeling Approach (Ecostatometrics) to determine the true composite consumption function of the Nigerian economy and analyses the impact of Consumption on the Nigerian economy as a whole, with a view to contribute to the economic discourse. At the end of the study, it was found out that the consumption function can best be determined and analyzed as part of a complete economy for it to be meaningful, and requisite recommendations were made. Key Words: Total differential systems modeling approach, Consumption Function, Household spending and Disposable income.

Keywords

Total differential systems modeling approachConsumption FunctionHousehold spending and Disposable income.

References

Adeyoju, S. K. (1975). Forestry and the Nigerian economy. Ibadan University Press, Nigeria. Aruofor, R. O. (2001). Economic Systems Engineering: An Essay in quantitative models and methods for development planning. Thy Kingdom Press (Subsidiary of Systemod Nigeria Ltd.),Miscellaneous Publishers, Sapele, Nigeria, 2001. Aruofor, R. O. (2003): A Presentation of Two Simulated Approaches to Markov Chains Transition Matrix Estimation from Aggregate Data. The Nigerian Economic and Financial Review,Vol. 8 No. 2 pp 51-76,:Department of Economics and Statistics, University of Benin December, 2003. Aruofor, R. O. (2017). Economic Systems Engineering, Poverty, Unemployment and Under- Development: A Quest for Solution and Imperatives for Developing the Nigerian Economy. In Proceedings of the 6th Inaugural Lecture Series, Benson Idahosa University, March 6. Aruofor, R. O. and Okungbowa, E. Flourence (2018). Estimating the Real Impact of Devaluation on an Economy: The Case of the Naira. The Indian Journal of Economics. Vol XCVIII, No. 390 Part III pp 343-360, ISSN 0019-5170, Jan.2018. Aruofor, R. O. K. (2020a). Economic Systems Engineering: Modeling And Applied Quantitative techniques For Economic And Development Planning. Amazon Books, ISBN:9798689936024 Aruofor, R. O. K. (2020b): EPILOGUE TO ECONOMIC SYSTEMS ENGINEERING: The Religious Angle and the Good News.Amazon Books, ISBN: 9798554307843 Aruofor, R. O. and Ogbeide, D. R, (2020): Empirical Evaluation of the Impact of Corruption on Nigeria’s New Democratic Governance. International Journal of Innovative Social Sciences & Humanities Research 8(3):69-90, July-Sept., 2020 Aruofor, R. O. and Ogbeide, D. R, (2022a): The Buhari-Osinbajo Regime in Nigeria: A Post Mortem. Journal of Public Administration and Social Welfare Research E- ISSN 2756-5475 Vol. 7 No. 1 pp 17-34, 2022 Aruofor, R. O. and Ogbeide, D. R, (2022b): The Impact OfBoko Haram Insurgency And Banditry On The Nigerian Economy: Understanding The Causes And Feedback. International Journal of Innovative Development and Policy Studies 10(1):14-26, Jan.-- Mar., 2022 Aruofor, R. O. and Ogbeide, D. R, (2023a): The Impact Of Fuel Subsidy On The Nigerian Economy In The Fourth Republic: An Analysis. International Journal of Social Sciences and Management Research P-Issn 2695- Vol. 9 Issue 5, pp 63-80, June 2023. Aruofor, R. O. and Ogbeide, D. R, (2023b): Evaluation Of The Consequences And Implications Of The Domestic Petrol Pump Price Increase In Nigeria By The Bola Tinubu Administration. Journal of Humanities&Social Policy Volume 9 September Issue, 2023, pp 42-61 Aruofor, R. O. and Ogbeide, D. R, (2024a): Analysis Of Poverty And Unemployment In Nigeria’sFourth Republic: An Outlook To Year 2035. International Journal of Social Sciences andManagement Research, Vol 10 No. 1, pp 42-54, 2024. Aruofor, R. O. and Ogbeide, D. R, (2024b):An Escalating Analysis of the Role, Impact and Ramification of Investment in the Nigerian Economy and Outlook to Year 2035 International Journal of Social Sciences and Management Research Vol 10. No. 3 pp. 77-104, 2024IIA Aruofor, R. O. and Ogbeide, D. R, (2024c): A Simulation Analysis of President Bola Tinubu’s Price Deregulation Policy on the Nigerian Economy: An Outlook to Year 2035 Journal of Public Administration and Social Welfare Research P-ISSN 2695- 2440 Vol. 9 No. 1, pp. 74-100, 2024 jpaswr Aruofor, R. O. and Ogbeide, D. R, (2024d): The 2024 Minimum Wage Review Exercise in Nigeria: Critical Issues to Note. Journal of Public Administration and Social Welfare Research Vol. 9 No. 3, pp. 28-49, 2024 jpaswr . Aruofor, R. O. and Ogbeide, D. R, (2024e):The Development of Nigeria and the Bane of Development: A Search for A Satisficing Investment Policy for A Self-Reliant Economy International Journal of Social Sciences and Management Research E- ISSN 2545- 5303 Vol 10. No. 8 pp. 263-277, 2024 Online Version Aruofor, R. O. and Ogbeide, D. R, (2024f): The Role and Impact of the Banking Industry on the Nigerian Economy: An Outlook to Year 2030 IIARD International Journal of Banking and Finance Research Aruofor, R. O. and Ogbeide, D. R, (2024g): Analysis of the Impact of Taxation on A Nation’s Citizenry: The Implications of Maximizing Tax Revenue Under Nigeria’s Extant Paradigm. E- ISSN 2545-5966 Page 14-31 Aruofor, R. O. and Ogbeide, D. R, (2024h): Analysis of the Impact of External Debt on the Nigerian Economy: The Implications and Consequences of the Recent Request for $2.2 Billion Loan. pp242-267 Aruofor, R. O. and Ogbeide, D. R, (2025): Assessment of the Impact of Inflation and Unemployment on the Nigerian Economy: Some Mathematical Systems Predictions for Politico-Economic Growth and Development. IIARD International Journal Of Economics And Business Management P-ISSN 2695-186X Vol 11. No. 2 pp. 167-1942025 Aruofor, R. O. and Ogbeide, D. R, (2025): Sustained Development Of Nigeria: An Assessment Of The Impact Of Investment Drive In The Agricultural Sector Of The Economy. International Journal of Agriculture and Earth Science P- ISSN 2695-1894 Vol 9. No.11 No.5 2025 pp 109- 130. Aruofor, R. O. and Ogbeide, D. R. (2025):President Bola Tinubu’s Administration in Nigeria: Mid-Way Evaluation of Performance in the First Term. Journal of Political Science and Leadership Research E-ISSN 2504-883X P-ISSN 2695 2432 pp26-48. Aruofor, R. O. and Ogbeide, D. R. (2025): Demand Pressures on the Welfare of Nigerian Citizens: Requirements for Minimisation of Impact on the Economy. International Journal of Social Sciences and Management Research P-ISSN 2695- 2203 pp659-682 Aruofor, R. O. and Ogbeide, D. R, (2025): Poverty and Hunger in the Nigerian Economy: An Impact AssessmentJournal of Public Administration and Social Welfare Research E- ISSN 2756-5475 P-ISSN 2695-2440 Vol. 10 No. 7, pp.76-102, 2025 jpaswr . Aruofor, R. O. and Ogbeide, D. R, (2025): Optimal Control Of The Nigerian Economy Under Extant Paradigm: Implications And Consequences. International Journal of Social Sciences and Management Research Vol 11. No. 10, pp. 430-453, 2025 CBN (2017). Central Bank of Nigeria Statistical Bulletin, Abuja. CBN (2018). Central Bank of Nigeria Statistical Bulletin, Abuja. CBN (2019). Central Bank of Nigeria Statistical Bulletin, Abuja. CBN (2021). Central Bank of Nigeria Statistical Bulletin, Abuja. Duesenberry, J. S, Fromm, G, Klein, L. R and Kuh, E. eds, (1965). The Brookings: Quarterly Econometric Model of the United States Economy, Chicago; Rand McNally, 1965. Evans, M. K. (1969): Macroeconomic Activity, Theory, Forecasting and Control. Harper & Row, Publishers. Gordon, R. J. (1968): The Brookings Model in Action: A Review Article. Journal of Political Economy,pp 489-525. Koutsoyiannis, A.( 1977): Theory of econometrics. The Macmillan Press Ltd., London and Basingstoke. Stolper, W. F.(1966):Planning without facts.Harvard University Press, Cambridge, Massachusetts.

More Articles from INTERNATIONAL JOURNAL OF ECONOMICS AND FINANCIAL MANAGEMENT

Bridging Legal, Financial, and Data Governance in Enterprise AI: Emerging Trends

Author: Funmilayo Ashore-Onisemo, Ebehiremen Faith Iziduh, Uchechi Mary-Linda Unamma, Ifeanyichukwu Jeffrey Okwesa

Document Governance and Organizational Learning Among Administrative Officers of Agricultural Research Institutes in Southwest Nigeria

Author: Titilayo Juliet Sodiyan1 Oluwatosin A. Ologboosere2

Macroeconomic Policies and Economic Stability in Nigeria

Author: Abel-Tariah Emmanuel Onate, Okon, Ekanem Nsikhe, Nwenyi Francis Onwe

Oil Price Shocks and Macroeconomic Adjustment: Evidence on Exchange Rate, Inflation, and Interest Rate Dynamics in Nigeria

Author: F. A. Adebimpe, A. A. Onabote

Determinants of Bank Liquidity in Nigeria

Author: Nelson Johnny Ebifemo-ere Stephen