HON Tai Yuen, KurtKurtHON Tai Yuen2016-06-112016-06-112016Journal of Economics Library, 2016, vol. 3(1), pp. 94-99.http://hdl.handle.net/20.500.11861/2616Open access<br> This article was published in "Journal of Economics Library" in Vol. 3, Issue 1, p. 94-99.Includes bibliographical references.6 p.Friedman (1957) states that permanent consumption is a function of permanent income in the long-run. Co-integration theory is first used to test whether a long-run equilibrium relation exists between the two variables. The existence of an error-correction form between two variables is necessary and sufficient for them to be cointegrated. We applied for an error-correction form to conform the linear long-run relationship between permanent income and permanent consumption under special conditions and the elasticity of permanent income in logarithms with respect to permanent consumption in logarithms is unity.enPermanent ConsumptionPermanent IncomeCo-IntegrationError CorrectionConsumption (Economics)Income.Peer Reviewed Journal Article