Life Cycle Hypothesis

Life Cycle Hypothesis

Life cycle hypothesis states that a particular consumer always plans to smooth out his or her consumption over his or her lifetime subject to lifetime income or resources. In other words, The saving to consumption decision of a consumer unit reflects more or less conscious attempt to the acieve the preferred distribution of consumption over his or her lifetime subject to lifetime income.

Meaning and Assumptions

Figurative analysis

Mathematical Derivation

Reconciliation of Short-run and long-run consumption function

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Other online resources

Life Cycle Hypothesis | Wikipedia

Suggested Readings:

Agarwal, Vinita. (2010). Macroeconomics: Theory and Policy. New Delhi: Pearson India

Vaish. MC. (2010). Macroeconomic Theory. (14th Ed.). New Delhi: Vikas Publishing House Pvt. Ltd.