Household behavior

Abstract

Every action that a household performs concerns the acquisition of a good. In this context not only the different consumer goods, but also money, equity shares, and receivable amounts of money are considered as goods. The receivable amounts are further categorized according to the time horizon by which they are to be received. For each time horizon they are considered a different type of good. All these types of goods are valued separately and according to the law of diminishing marginal utility. Thus, as the quantity of a certain good that a household possesses increases, his valuation of an additional unit of the good decreases. At the beginning of a time period the number of consumption goods in the possession of households is zero, since the households fully consume consumption goods at the end of each time period. Equity shares and savings contracts, in contrast, are accumulated by the households until they are redeemed or expired.