Consumption (economics)

Underconsumption (Latin consumere " consume " ) is generally understood as the consumption or consumption of goods. In the economic sense of the term stands for the purchase of goods for private use or consumption by consumers (households). Economically, the output of goods is referred to as use often.

The general term consumption also includes meanings that do not fall under the definition of consumption.

• 2.1 consumption in the national accounts
• 2.2 Consumption in the macroeconomic balance
• 2.3 Theoretical aspects of demand
• 2.4 Other theories

• 4.1 The disposable income
• 4.2 The marginal propensity to consume
• 4.3 The autonomous consumption

Development of consumption

Consumption exists, since there is the humanity, because goods have always been consumed. In ethnology are all social units of a society in which there is consumption, referred to as consumer community. These are primarily households, but also clans, village communities, purpose associations, etc. The common consumption, which goes beyond the budget reaffirms the social cohesion of the group.

15th and 16th centuries

A consumer society ( in the individualized consumption per se and more important than the social component) developed for the first time in England in the 15th century, when among other things, the emergence of new printing technologies and the cotton trade could significantly increase consumption. A consumer society is characterized in that the people not only consume the or buy what they need to survive, but also what makes life " more beautiful".

18th century

In the 18th century the population bought what they could not produce themselves, on a weekly and annual fairs. There were no fixed prices, it was traded. With luxury goods such as spices and fine fabrics initially used only the nobility conspicuous consumption. Over time, emancipated the bourgeoisie and thus its purchasing power grew. The human interest developed from a need to request. It has now also consumed to represent something. In the UK grew in the early 18th century, the industry and jobs. Due to the associated increase of the income of the middle class mass consumption goods increased demand, such as for beer, tea, soap and printed clothing. Fashion magazines were the most successful means of communication for the consumer society and led to an increase in the consumption needs. Soon moved to other magazines. In addition to the UK and France, Germany and Holland have been influenced by this revolution.

19th century

An innovation middle of the 19th century was the advertising column. It offered plenty of space for advertising and was an important means to increase sales. Through the development of advertising in newspapers, magazines and shop windows of consumption has steadily increased. Due to industrialization in Europe and North America emerged complex production, transport and information networks. End of the 19th century, the first consumer houses were built, which were characterized by fixed prices. Due to the increased supply, the consumer needs and consumer spending grew.

20th and early 21st century

The economic miracle and the mass consumption associated began to rebuild Germany after the Second World War. From the luxury goods above was mass-produced. Also international freight came in the 50s on the market and began the globalization of consumption. In the 1960s, the market for electrical appliances boomed in the 1970s, the market for plastic furniture, precious raw materials and energy. In the 1980s, a kind of luxury addiction developed. Wealth and beauty gained more importance. The World Wide Web developed an innovative dimension of consumption. This has made it possible to order directly from the producers in other countries. Consumption has become a pastime of many people. " The Federal Association of German Mail Order Traders assumed that consumers in Germany have issued in 2007 was € 16.8 billion for Internet purchases - and rising. "

Another current trend is the politicization of consumption. Here companies try their products to complement a political dimension and upgrade ( greenwashing campaigns such as the rain forest project of the beer - brewing Krombacher, 2008), media make certain on the political consequences of consumer behavior carefully and NGOs call on a specific consumer or boycott behavior (eg Shell boycott, 1995).

Many studies emphasize the effect of the global consumption on climate change. The Worldwatch Institute has in the report State of the World 2010 ( State of the World Report 2010) suggest that global consumption " climate killer number one" was. If all Earthlings would live example as the Americans, the planet could only around 1.4 billion people (instead of over 7 billion as today) feed.

See also: conspicuous consumption; Consumer society; consumerism

Consumption in the context of economic theory

Consumption in the national accounts

For a description of consumption, it is necessary to explain the relationship between businesses and households. This relationship is described in the national accounts. An example to illustrate this relationship is the closed economic circuit without government activity. Households provide labor services to the companies with which the company can produce goods. These are bought by households and consumed. With the help of consumed goods is allowed households to supply more labor services and the company continues to produce and generate revenue wherewith to pay the work performed again with income (Y). With the help of which households can in turn pay the consumption expenditure to the company. In the simplified illustration, it is assumed that households save nothing from their income. Thus they give back everything to the purchase of consumer goods and pay for consumer spending (C). Thus, the total gross domestic product or the entire income of all of the economic operators (Y) can be as addition of private consumption expenditure ( C) and investment spending (I) represent: .

Consumption in the macroeconomic balance

The portion of income that is spent on consumer sales, it's called total consumption of a household. Saving ( S ), however, is the unused part. As a result, the sum of total consumption and savings must be equal to the household income, ie. Thus, there is a macroeconomic equilibrium, the savings (S ), ie the difference between income (Y) and consumption (C ) must be equal to the expenditure on the investment. Mathematical derivation:

Furthermore, corresponding to the equilibrium production (Y) the demand for goods (Z). The overall economic demand for goods can be explained by the addition of consumption (C ), investment (I), government spending (G) and net exports to GDP () calculate. Since there is no outside post in a closed economy, applies EX -IM = 0 Thus, the demand for goods can be represented by the following identity equation. The demand for goods by households (Z ) depends on the consumption and thus on income. But equilibrium is reached only if and thus applies:

Demand Theoretical Aspects

The purpose of all business is to satisfy the needs. Households are thus supplied with the consumer, they ask. The demand for a good in comparison to another is governed by the price. Furthermore, the demand is influenced by the benefits that the goods donate, the needs of people and the income available to households available. Consequently, the consumption of private households also depends on the factors mentioned above. With rising price of a good and / or falling incomes generally reduces demand of households.

Other theories

The demand theory aims not only to the increase of consumption as the actual determinant of economic growth, but generally to a balanced and reasonable demand for consumer and capital goods. The purchasing power theory can be seen in this sense as a theory that there is a reasonable level of economic growth in a balanced distribution of income.

Structure of consumption expenditure

Consumption is an aggregate of the gross domestic product, according to economic use statement. Consumer spending is divided into three parts:

• Private final consumption expenditure ( private consumption); this includes all goods and services purchases by households (households of entrepreneurs, workers, pensioners, unemployed ) and the independent individual activities such as restaurant owners, freelancers in Germany. To include durable goods such as furniture and vehicles to the consumer.

Real estate purchases in the expenditure of GDP are generally recognized on the ESA counted as investment spending, however.

• Final consumption expenditure of private organizations, such as churches, unions.
• Government final consumption expenditure ( government consumption ); this includes all services that are not offered by the state in the market. All running costs, such as salaries for teachers and civil servants are regarded as government consumption.

Influencing factors of consumption

The disposable income

"An important determinant of consumption expenditure of households is the income enjoyed by the households in this period" The consumer can therefore be described as a function of disposable income.

The disposable income () is the disposable income or the net income of households, that is, the income available after taxes and respect of transfers (eg unemployment benefits and pension payments).

The sum of consumption (C ) is therefore dependent on the net income () of households. With rising incomes and the consumption sum and vice versa increases. Higher taxes, however, lead to a decline in consumption.

The marginal propensity to consume

The marginal propensity to consume () is a means-tested size, since it is multiplied in the consumption function () with the disposable incomes. It describes the effect of an additional unit disposable income on consumption. Additional income causes an increase in consumption. This relationship is called the marginal propensity to consume and can be represented as follows:

The marginal propensity to consume is always less than or equal to 1 The reason is that the increase in consumption is dependent on the income increase. It should be noted that the increase in consumption is never greater than the increase in revenue, as applies. If the household does not apply to save. If only a portion of the additional disposable income is spent on consumption, is the marginal propensity to consume less than 1 If everything is output, it is 1 The slope of the consumption function corresponds to the marginal propensity to consume.

Example:

The marginal propensity to consume and the slope of the consumption function is in this example.

In the figure of the consumer on the ordinate and the income will be plotted on the abscissa. The function is drawn. It passes through the origin, since no constant is contained in the equation. For example, the income was demolished in the amount of 450. If this value is now in the consumption function as follows, one obtains the corresponding consumption:

The autonomous consumption

The autonomous consumption () is also part of the consumption function, but regardless of available income. This size is in what is always needed, that is, how much is consumed in any disposable income and is always positive, because you always have to drink and thus always consumed something. If no current income accrues to households, the consumption has to be financed by borrowing. The autonomous consumption explains the behavior of households. This is the size of the influence of the factors is expressed that determine the additional demand for consumer goods other than the income.

Example

In the above example, the consumer is considered only as a function of disposable income. In the following, in addition, the influence of the autonomous consumption is considered the functional equation. It is in this example, and is constant. Thus, the consumption equation is now:. The corresponding function graph is shifted by 50 units upwards.

Consumption in a business sense

In a business sense, a distinction between consumption and production goods. Consumer goods are goods output, while production of goods received as input goods in the production process, which then ultimately turn may be part of consumer goods. The consumption of raw materials and supplies in operational service process is known in the operational cost accounting values ​​as consumption or costs.