Estimating the Family Consumption Function in the Libyan Economy: An Applied Study on Tawergha

Abstract

This study aims to examine the reality of family consumption among social security pensioners in the city of Tawergha and to estimate their family consumption function for the year 2026. It seeks to investigate the relationship between income, family size, and consumer spending, and to measure the marginal propensity to consume, with the goal of understanding family consumption behavior and identifying the economic factors influencing it. This study adopted the descriptive-analytical approach, first addressing the theoretical framework related to consumption behavior in Keynesian theory, alongside the quantitative econometric approach to estimate the consumption function for social security pensioners in Tawergha. Among the most prominent findings of the study is the existence of a positive relationship between income and consumption, as well as between family size and consumption. The marginal propensity to consume was found to be 0.76, indicating that 76% of any increase in income is directed toward consumption, while the remaining percentage is saved. The coefficient for family size reached (110.41), meaning that each additional family member leads to an increase of (110.41) dinars in monthly consumption. The coefficient of determination (R²) reached (76%), indicating that (76%) of the changes in consumption can be explained by changes in both income and family size, while (24%) of the changes are attributed to the effect of other factors not included in the current study. The correlation coefficient between consumption and income was (0.83), indicating a strong positive relationship between the two variables, whereas the correlation coefficient between consumption and family size was (0.39), indicating a weak positive relationship between them.