The Utilization of a Universal Concept for the Modelisation of Consumer Spending

Zin Eddine Dadach

Abstract


The first objective of this fundamental research is to utilize a universal concept of dynamic systems in order to propose a mathematical model that could correlate consumer spending, utility and income. The difference between the proposed mathematical model and the Keynesian consumption theory is explained by the fact that the Keynesian consumption theory takes into account the consumption of costumers with no income.  For the second objective of this study, the effects of marketing, bank loans and credit debt on consumer spending are also analyzed using the universal concept and mathematical models are presented for the first time. Based on a case study, marketing has increased the utility (driving force) by 61%.  Taking into account the theory of consumption smoothing, bank loans also provide the consumer with additional spending power by decreasing the resistance for spending. However, in case of excessive debt, customers might spend money only to buy the “utility” in order to be able to repay the debt. In this situation, the effects of debt are described in the corresponding proposed model as a decrease in income (extra resistance to spend money).


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