“a Study on Consumption, Savings and Investment Behavior of Mutual Funds with Reference to Customers at Sharekhan, Mangalore”

Topics: Mutual fund, Investment, Hedge fund Pages: 43 (9275 words) Published: February 28, 2013

“A STUDy on consumption, savings and investment behavior of mutual funds with reference to customers at sharekhan, mangalore” Submitted in partial fulfillment of the requirements for the award of the degree in MASTER OF BUSINESS ADMINISTRATION

Submitted by

2nd year M.B.A

under guidance of

company guide institute guide mr. adarsh PROF. R.K. ACHARYA ASST. MANAGER FACULTY, SHAREKHAN S.I.M.S

APRIL 2009

The concept of consumption is one that varies between the academic community, governments and between individuals. According to some economists, only the final purchase of goods and services constitutes consumption, and every other commercial activity is some form of production. Other economists define consumption much more broadly, as the aggregate of all economic activity that does not entail the design, production and marketing of goods and services (e.g. "the selection, adoption, use, disposal and recycling of goods and services"). Likewise, consumption can be measured by a variety of different matrix. The total consumer spending in an economy is generally calculated using the consumption function, a matrix devised by John Maynard Keynes, which simply takes the aggregate disposable income and multiplies it by a "marginal propensity to consume". This matrix essentially defines consumption as the part of disposable income that does not go into savings. But disposable income in turn can be defined in a number of ways - e.g. to include borrowed funds or expenditures from savings. John Maynard Keynes developed the idea of the consumption function, which sees consumption as consisting of two main parts: 1. Induced consumption refers to increases in consumer spending occurring as disposable income rises. Increases in consumption follow the famous marginal propensity to consume. An increase in disposable income leads to an increase in consumption, moving along the consumption function in a graph. 2. Autonomous consumption refers to consumption spending done as part of long-term plans for the future (smoothing out income fluctuations, providing for retirement and other expected future events, etc.) and as a result of habits and contractual commitments. Changes in plans, expectations, habits, etc. leads to shifts of the consumption function in a graph. Often, as in the permanent income hypothesis, the word "consumption" refers instead to the benefit received from consumer goods and services (as opposed to the amount spent on such products). The consumption function or propensity to consume refers to income consumption relationship. Consumption function is a “functional relationship between two aggregates i.e., total consumption and gross national income”. This relationship is expressed as :

C = f(y)
where: c = consumption ( dependent variable) y = income ( independent variable) f = functional relationship. Keynes Consumption Function or The Absolute Income Hypothesis: Keynes highlighted the functional relationship between income and consumption expenditure of an individual or of a household and hence of the economy. He developed the concept of the Consumption Function indicating a functional relationship between income and consumption expenditure. According to him, the current consumption expenditure of economy depends on the absolute level of its current disposable income. CONSUMPTION SCHEDULE

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