Asymptotic Limit of Consumption and Threshold Level of Income with Reference to Indore City

Abstract

The concept of asymptotic level of consumption is defined as increase in consumption of a commodity with income but only up to a level and then after reaching a maximum level it becomes stable irrespective of income. Especially, food consumption stops increasing with an increase in income because of the limitation associated with digestive system. It is observed that empirical study on maximum food consumption as well as threshold income have not been done on Indian situation. Growing need was felt to conduct an academic study for Indore city with respect to their food consumption pattern to derive the maximum potential level of consumption termed as asymptotic limit of consumption as well as threshold level of income. Data from Indore city are collected on the basis of a sample of size of 714 household units. Then, the asymptotic limit of consumption and threshold level of income have been estimated using reciprocal transformation method. In all the cases, there exists significant positive relationship between income and food consumption. Hence, the first hypothesis, β1> 0, was accepted at 5% level of significance for food commodities rice, wheat, other cereals, pulses, dairy products, edible oil, eggs and other food items. This indicates that increase in income results in increase in food consumption derived from the above mentioned food categories. Consumption of these food categories seems to have reasonable prospect for expansion although at a lower rate, especially in the case of animal products. The analysis suggests that consumption is still well below saturation level( asymptotic level) and that appreciable increases are still possible.