Analysis on Relationship between Income and Consumption Demand of Rural Residents

This paper has established an ECM model including dummy variable by taking the income of rural residents and their consumption demand in Shaanxi Province as an example.We have tested this model and fond that it is fit in performance.This model can accurately reflect the basic characteristics of the rural residents' consumption demand in Shaanxi Province at present.That is that the marginal propensity to consume(MPC) is a little bit low and the effective demand is insufficient.Therefore,some effective measures must be taken,for example,to improve the rural consumption environment,to develop appropriately the rural consumer credit,to perfect the rural social security,and to renew the farmers' consumption concept.So that the farmers' consumption confidence can be enhanced,the rural consumption demand can be enlarged,and the goal to ensure the economic growth can be achieved.