Consumption (economics)

Consumption, defined as spending for acquisition of utility, is a major concept in economics and is also studied in many other social sciences. It is seen in contrast to investing, which is spending for acquisition of future income.[1]

Different schools of economists define consumption differently. According to mainstream economists, only the final purchase of newly produced goods and services by individuals for immediate use constitutes consumption, while other types of expenditure — in particular, fixed investment, intermediate consumption, and government spending — are placed in separate categories (see Consumer choice). Other economists define consumption much more broadly, as the aggregate of all economic activity that does not entail the design, production and marketing of goods and services (e.g. the selection, adoption, use, disposal and recycling of goods and services).[2]

Economists are particularly interested in the relationship between consumption and income, as modelled with the consumption function. A similar realist structural view can be found in consumption theory, which views the Fisherian intertemporal choice framework as the real structure of the consumption function. Unlike the passive strategy of structure embodied in inductive structural realism, economists define structure in terms of its invariance under intervention.[3]

Consumption of household is the use of goods and services, this is not to be confused with consumption expenditure or consumer spending. Those describe the amount of money that is spent on goods and services. In those durable goods and other similar expenses are counted differently [4] [5]

  1. ^ Black, John; Hashimzade, Nigar; Myles, Gareth (2009). A Dictionary of Economics (3 ed.). Oxford University Press. ISBN 9780199237043.
  2. ^ Lewis, Akenji (2015). Sustainable consumption and production. United Nations Environment Programme. ISBN 978-92-807-3364-8.
  3. ^ Hsiang-Ke, Chao (2007). "A structure of the consumption function". Journal of Economic Methodology. 14: 227–248. doi:10.1080/13501780701394102.
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