Even without being experts in the field of macroeconomics, each of us knows what the consumption of goods is. This is a category that economists are actively using, but at the same time, it is well known to people who are far from financial sciences.
In this article we will talk about consumption a little more than the average citizen knows. The materials on which this article was written were taken from educational and analytical resources and simplified for the most simple and quick assimilation.
general characteristics
To begin with, we will give a scientific definition that characterizes the category of “consumption”. So, this is the expenditure of a certain product (product or service) in the process of satisfying one's own needs. From the point of view of the economy, consumption is interesting to us for the reason that it always exchanges some goods (mainly material, that is, money) for a product or service that a person wants to consume. Thus, due to our desires, there is consumption. This is a normal process - humanity has been living on such a model for many millennia.
What do we consume?
Since, as noted above, the main goal that consumption pursues is the satisfaction of needs, we can conclude that we use goods that can provide us with benefits in the form of satisfied needs. This, in particular, food, water, clothing, comfortable and safe housing, a vehicle for movement. It is these things that make up, according to financiers, the main economic volume. Consumption (this applies to all the groups of goods mentioned above) allows you to replace them, improve, develop production and expand the range of things that interest people.
Due to this, on the one hand, there is production growing due to demand for products, and on the other hand, there are people who consume goods that are present on the market. To date, the model is perfectly tuned: for the purchase of food, housing, transport, a person must work, performing socially useful functions. In the process of labor, he creates goods and services that are consumed by other people, and so on. The exchange currency in this relationship is money that can be spent on consuming any product. What it will be, a person chooses independently, listening to his needs and needs.
Addiction to consumption
The life model of each person, as noted above, is debugged in such a way that we must work in order to receive money that will be exchanged for goods or benefits. If someone does not want to work, he will not be able to exchange money for the goods, and as a result he will not receive material goods that can satisfy natural needs. As a result, a person will try to minimize his consumption expenses. This phenomenon has an opposite side, the name of which is “propensity to consume”.
It works as follows: if income increases, accordingly, the amount of funds that go to the consumption of goods grows. This can be traced even in the vein of modern national economies: the greater the income of the inhabitants of a country, the more goods they consume. Human nature is such that, as far as possible, we show a tendency to consume. This is a social law proving the constant growth of our needs.
Consumption markets
From the general ideas about economic theory, each of us understands that the market is the place of sale of products.Accordingly, the consumer market is, relatively speaking, the ways and directions of the sale of goods and services. In economic theory, this category deserves special attention, because by studying the markets for a particular product, one can trace the general situation. We give a concrete example.
There are two categories of markets - scarce and excess. The former are those on which there is a shortage of products, the latter, on the contrary, feel an excess of goods, due to which manufacturers are in quite strong competition.
If we study the market and know that there is a shortage of goods of category “A” on it, we can say about the low quality and high price of such products. Conversely, in the consumer market, where there are a large number of offers, the products will be more high-quality and cheaper, because there is a struggle for the buyer.
Consumption level
Another category that should be mentioned is the level of consumption. This is another component that allows you to learn more about a particular market. With its help, you can determine how high demand for a particular product exists in a particular consumption market. In turn, this allows manufacturers to predict the amount of consumed goods that need to be manufactured.
Objectively, it is possible to estimate consumption volumes only by the statistical method, collecting data on the number of sales made. Also, to identify this data, you can connect the method of sociological research, surveys, etc., but all these methods will not be able to provide as accurate information as simple sales statistics. Another thing is that it is a trade secret and only the manufacturer has access to it.
The ratio
Another important point that should be paid attention to when speaking about consumption is the change in its dynamics. Researchers have long been paying attention not just to its level, but to how the relationship between the categories of “income” and “consumption” is changing. This allows us to determine the nature of people — what we talked about above — about increasing human demands as income rises. The more we have, the more we consume. There is even a special indicator called the marginal propensity to consume. This is a parameter that indicates how much the level of consumption will change with an increase in income by one unit (or percentage, depending on the scale of measurement). This allows you to schedule how people's appetites change.
If we drastically reduce the amount of exchange currency (money) for which we can receive benefits that satisfy our needs, in the same way a person optimizes his needs, making them more modest.
However, not only this allows you to find out the ratio of consumption. This is just one of the questions posed to researchers. No less important is the topic of the relationship between consumption and consumption when buying high-quality and expensive and low-quality, but cheap goods. The results confirmed expectations.
High-quality and low-quality goods
Buying more expensive products, a person naturally spends more money. At the same time, of course, he gets more pleasure from the process, and, thus, its further consumption increases. As a result, the indicator responsible for the result of how much we liked a particular product grows proportionally with our desire to repeat the experiment and get the same product again. Again, the ultimate propensity to consume is launched. These are normal processes that are activated somewhere deep in human psychology.
The researchers observed another situation when buying low-quality products. The costs for it were slightly less than in the previous experiment, but at the same time, due to the lower quality, the person received less pleasure from the resources consumed.As a result, his level of satisfaction fell, and with it the desire to continue consuming the same products.
These comments are useful in that they reflect a model of our behavior in everyday life. When you choose at what price to buy cookies, you can notice the pattern yourself: when you buy an expensive product, you get more pleasure, while the desire to buy is still growing. And vice versa, having tasted cheap products, you understand that you were wrong, trying to save on quality.
Consumption is the engine of progress
Many researchers working in this field call the growth of our appetites (as we outlined a little earlier in the text) the engine of human progress. Perhaps they are right: through the desire to get more, we try to produce, respectively, more goods (goods and services). Due to this, there is an expansion of sales markets, updating the assortment, improving production technologies and so on.
Volume increase
The growth of income (and hence the ability to meet their needs) leads to an increase in consumption. This means that the more the country's population begins to earn, the more it consumes. This way of things triggers a vicious cyclical reaction, as manufacturers become even more interested in increasing the quantity and improving their products, followed by a further increase in income.
Production growth
In general, an increase in production is a separate topic for discussion. Since all goods consumed are the fruit of our industry, and the latter, in turn, is the engine of economic progress in many countries, it can be stated that the more we consume, the more the state economy progresses. This statement is partially confirmed by the thesis, which is stated above.
Consumption research
Of course, if the satisfaction of needs through the use of various goods is a purely practical component that we all face every day, then studying it is a dry theory, not always tied to facts. Therefore, the task of scientists is to, firstly, identify some patterns of individual statistics; secondly, to develop theories that would explain their action and existence; thirdly, to confirm them in practice and to engage in further study of related issues. That is exactly what the analysts working with the consumption category are doing at the moment.
As for economic processes, they, of course, take place in our life without our participation. All we need is to try to understand them as best as possible so that we can avoid mistakes in the future. In addition, understanding how the economy works can help develop a new course for our country to prosper and develop.
