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Household Consumption

In: The Subprime Crisis Lessons for Business Students

Author

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  • Jaime Luque

    (1University of Wisconsin-Madison, USA)

Abstract

Households make consumption decisions by maximizing their level of utility subject to their budget constraint. When negative wealth shocks affect a household’s budget, consumption decisions must be adjusted accordingly. The fall in property values that followed the bursting of the housing bubble is an example of such a shock, and it effectively had an impact on consumers’ behavior. A decrease in consumption sends ripples through the economy, and can exacerbate an already negative economic climate. Understanding how consumption was affected by the subprime crisis is crucial in ascertaining how a crisis in a specific sector affects the economy as a whole…

Suggested Citation

  • Jaime Luque, 2017. "Household Consumption," World Scientific Book Chapters, in: The Subprime Crisis Lessons for Business Students, chapter 4, pages 29-37, World Scientific Publishing Co. Pte. Ltd..
    • Handle: RePEc:wsi:wschap:9789813200043_0004
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    More about this item

    Keywords

    Subprime Crisis; Great Recession; 2009 Recession; Mortgage; Financial Market; Preventing Recession; 2009 Crisis; Interest Rates;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G1 - Financial Economics - - General Financial Markets

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