Vol. 3, Issue 6, Part S (2017)

In the economic development of the any nation, the three components- income, consumption and saving are most important indicators for the development process. According to Keynes, when income increases the consumption will also increase but not in the same proportion. So, according to Keynes if the gap between income and consumption (i.e. saving) is not converted into investment, it does create the problems of unemployment. The component of consumption is, therefore, most important for the development process.

As a result of rapid urbanization, rising consumerism and changing lifestyles, the levels and patterns of the country’s food consumption expenditure has also begun to change. The consumption expenditure function is a good indicator of the economic status and the standard of living and also shows the relative importance of individual items in the consumption basket.

Therefore, in this paper an attempt has been made to analyze and compare the consumption levels of some of the most important food items (cereals and milk & milk products) in the urban and rural areas of Gujarat. An attempt has been made to estimate the Marginal Propensity to Consume (MPC) of these items of consumption through regression analysis.