Meaning of Consumption: The term ‘Consumption’ means utilization of goods and services for satisfying the human wants. It also means using up of utilities. For instance when a person eats an apple, he is said to consume it. Similarly when a patient uses the services of doctor, that means he availed the services of the doctor. It may be remembered that consumption implies the use of utilities of a good and service only. But consumption does not denote the destruction of goods and services. It means destruction of utilities of a good or service only. Such destruction of utilities take place either immediately or in due course of time. The destruction of utility is quick and immediate in the case of mango or a cup of tea. It is delayed and prolonged in the case of a scooter, T.V. etc.
Types of Consumption :
There are three types of consumption. They are : 1) Direct consumption, 2) Indirect consumption, 3) Wasteful consumption. They are explained below :
1. Direct Consumption : Goods like food, fruits, tea, Vegetables, flowers etc. satisfy our wants directly. They can be used immediately. Their consumption is known as direct consumption.
2. Indirect Consumption : Certain goods and services satisfy our wants indirectly, e.g. machines, raw-materials. They do not satisfy our wants directly. They produce other goods which satisfy human wants directly. The use of capital goods is known as “Indirect or productive consumption .
3. Wasteful Consumption : Those goods and materials whose utilities are lost or destroyed due to accidents or floods are known as goods of wasteful consumption. Wastage of food and beverages in dinners and marriages come under wasteful consumption.
Characteristics of Consumption :
Consumption has the following characteristics :
1) Consumption involves the use of the utilities of economic goods.
2) Goods like bread, milk, flowers etc. can be used only for once. Their consumption will become complete when once they are used.
3) Certain goods like cycles, radio, TV, Car, Refrigerators can be uses for several times. They have durable consumption value. So they are called as durable goods.
4) Consumption involves the process of change in the form of the goods. For example, tobacco is used for manufacturing cigarettes. Similarly cotton is used for manufacturing cloth. In these two cases, the goods lose their original form and take a new shape.
5) The duration of consumption is not same in the case of all goods. It is quick in some goods and is slow and prolonged in some other goods.
Consumption is both the beginning and end of Economics :
It is described that consumption is both the beginning and end, of Economics. Consumption takes place due to the innumerable and unending wants. Human wants are the beginning point of all economic activities. Goods and services are necessary to satisfy human wants. Individual earn income to purchase goods. This creates demand for goods. More consumption means more demand for goods. The nature and extent of economic activities are directly influenced by the consumption level of individuals. That is why it is described that consumption is the beginning as well as the end of Economics.
Importance of Consumption In Economics:
1. Consumption is the main basis of production: The consumption behavior of individuals determines the level of production. All decisions regarding production of different goods are taken on the basis of consumer’s demand.
2. Consumption the end of production: The aim of production is to Traduce and supply goods and services which are demanded by the consumers, ‘productive activities arc influenced by the changes in consumption pattern If individual’s. Hence Consumption is described as beginning as well as the end of production.
3. Consumption – the determinant of employment : Consumption determines the level of employment. An increase in consumption leads to an increase in demand for goods. It increases the level of production. As a result the level of employment increases. On the other hand a fall in the level of consumption leads to a fall in employment.
4. Consumption – the basis for innovation and technological improvements : Consumption encourages technological advancement. An increase in consumption leads to an increase in demand for goods. The entrepreneurs try to introduce new techniques of production and make new products.
5. Consumption – indicator of standard of living: Standard of living of people will be determined by their level of consumption. When the people consume more and more necessaries, comforts and luxuries, then we can say that their standard of living is very high.
6. Consumption – a determinant of economic activity : J. M. Keynes stated that consumption behavior of individuals determines the nature and type of economic activities in an economy. Deficiency of consumption is the main reason for underemployment and in-equilibrium in an economy. In this way consumption is of great significance in an economy. It is the beginning as well as the end of production.