what is underconsumption 
underconsumption is the purchase of goods and services at levels that fall below the available supply understanding underconsumptionunderconsumption is an economic theory referring to recession and stagnation in this theory inadequate consumer demand in relation to the production of a particular good or service results in underconsumption underconsumption theories date back hundreds of years and have been largely replaced by modern keynesian economics and the theory of aggregate demand which is the total demand for goods and services in the economy at a particular time and price level underconsumption vs keynesian theoryunderconsumption asserts that consumption of less than is produced is caused by insufficient purchasing power and results in business depression furthermore the theory of underconsumption claims that because workers are paid a wage lower than they produce they cannot buy back what they produce therefore resulting in an inadequate demand for the product this can be rectified by government intervention specifically spending on public programs to restore the balance between production and consumption the keynesian theory addresses total spending in the economy and its effects on output and inflation and it was developed by the british economist john maynard keynes during the 1930s in an attempt to understand the great depression keynes advocated increased government expenditures and lower taxes to stimulate demand and pull the global economy out of the depression keynesian economics is considered a demand side theory that focuses on changes in the economy over the short run the theory of underconsumption deems inadequate consumer demand to be the only source of recessions stagnation and other aggregate demand failures and therefore a capitalist economy tends toward a state of persistent depression because of this in contrast modern economic theories find that inadequate consumer demand does not automatically cause a recession because other factors including private fixed investments in factories machines and housing and government purchases and exports may counteract this situation example of underconsumptionan example of underconsumption is the automobile industry during the great depression during the 1920s increases in disposable income and the new affordability of automobiles resulted in more people purchasing cars increased demand led to the creation of a large number of independent auto dealers and manufacturers 