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Visit: Support this Youtube channel and Design & Publish a T-Shirt using the link above. This channel is brought to you by MeTee T-Shirts: The place for on-demand t-shirts. T-shirt design in seconds & always free shipping. - Saturday July 30 2011 1:26 pm The permanent income hypothesis (PIH) is a theory of consumption that was developed by the American economist Milton Friedman. In its simplest form, the hypothesis states that the choices made by consumers regarding their consumption patterns are determined not by current income but by their longer-term income expectations. The key conclusion of this theory is that transitory, short-term changes in income have little effect on consumer spending behavior. Measured income and measured consumption contain a permanent (anticipated and planned) element and a transitory (windfall gain/unexpected) element. Friedman concluded that the individual will consume a constant proportion of his/her permanent income; and that low income earners have a higher propensity to consume; and high income earners have a higher transitory element to their income and a lower than average propensity to consume. - Like/Dislike, Comment, Favorite and share on Twitter, Facebook, and Google+ to get the word out on this video. Signup for the Daily News Email Subscription: If you are interested in becoming a channel sponsor for $1/day for 30 days send a Youtube Private Message letting me know.