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PSP 3000 CONSUMPTION
concept and definition
Sem ester 1, 2013/14
Laily Bt. Hj Paim
laily@upm.edu.my
Definition of Consumption Ecologist:
“what big fish do to little fish”
Economist: “what consumers do with their money”
Sociologist: “what you do to keep up with the joneses”
Consumption
Kyrk (1923,
pp 6-7) :
Broad scope, consumption varies according to time
and place, and shaped by the whole environment
where the individual is. Consumption includes style,
interest and impulse.
Hoyt (1938),
pp. 4-6):
Use of economic resources by consumers. Emphasis
not only G&S offered in the market but include all G&S
consumed by the hh from all sources including those
produced in the home, received as in-kind income or
provided by the government.
Cochrane &
bell (1956,
p.6):
Decision made by hh in choosing of G&S to be used.
Burk (1968, p.
3-13):
Various discipline related to distribution of resources
to satisfy wants.
Consumption
Magrabi
(1977):
Macro and micro analysis of household
consumption patterns and behavior.
Magrabi
(1991, p.5)
Household use of G&S, determinant of wellbeing,
human capital building, and main input in the
nation’s social and economic development.
In the consumption process, households need
resources. Thus quantity of consumption is
determined by types and quantity of available
resources, and how they use the resources.
CONSUMPTION ECONOMICS
• is a common concept in economics
• is defined in part by comparison to
production.
• only the final purchase of G&S by
individuals constitutes consumption,
while other types of expenditure —
in particular, fixed investment,
intermediate consumption and
government spending — are placed
in separate categories.
• Other economists define
consumption much more broadly, as
the aggregate of all economic activity
that does not lead to the design,
production and marketing
of G&S (e.g. the selection, adoption,
use, disposal and recycling of goods
and services).
• is the social science that analyzes
the production, distribution,
and consumption of G&S.
• Economics aims to explain
how economies work and how
economic agents interact.
• dimensions of economics : Micro
economics (examines the behavior of
basic elements in the economy,
including individual markets and
agents (such as consumers and firms,
buyers and sellers), and
macroeconomics (addresses issues
affecting an entire economy, including
unemployment, inflation, economic
growth, and monetary and fiscal
policy.)
Consumption economics
What need to be produced and how resources being
used for
How produced G&S are distributed among
consumers/households/individuals
5 dimensions: Behavioral, Economics, Technical, Temporal
and Aggregative
Family economics
The Economic Organization of the Household
economic theory of the
consumer
economic theory of
production
to better understand the behavior of individuals and
families
purchases of
market goods
and services
use of householders’
time in market work,
household work, and
other nonmarket
activities
investments in
monetary assets
and human
capital
The economics of the family =“new home
economics”
1930s “Family economics and home management” had
become a separate field of study within home
economics
Focuses on purchasing behavior, time use, & financial
management
Home management theory to understand family
decision making
Multidisciplinary -- integrate economics, sociology, &
psychology to study family behavior.
1934 Margaret Reid’s treatise, The Economics of Household
Production, dealing extensively with the productive
activities carried out by the household
The economics of the family =“new home
economics” THEORY BRIEF DESCRIPTION ECONOMIST
Economic Theory
Of The Consumer
Understanding the market demands for consumer
goods and services
Keynesian
macroeconomics
Consumer Theory Study of aggregate consumption and saving (Friedman 1957;
Modigliani &
Brumberg 1954)
Human Capital Human capital is itself an important generator of
economic growth
(Schultz 1974;
Becker 1975).
Recognition that married females made choices
between market work and household work
Jacob Mincer’s (1963)
Household
Production
Emphasized the time spent by individuals and
families in household production (i.e., Nonmarket
work), and formally incorporated the economic
theory of production into consumer theory.
Gary Becker (1965)
The use of consumer theory in explanations of
fertility
(Becker and Lewis
1974).
The application of consumer theory in explaining
the marriage and divorce decisions individuals
make
(Becker 1973–1974;
Becker et al. 1977;
Manser & Brown
1979; McElroy
&Horney 1981).
HOUSEHOLD
is a group of people who use
their collective resources to
pursue the same goals. A
household, therefore, can be
an individual, a family (a
group of individuals living
together and related by
marriage, birth, or adoption),
or a group of families or
unrelated individuals (so
long as they jointly use their
resources to pursue the
same goals).
Goals
maximizing
satisfaction/
happiness/
well-being
Activities
1. Market work,
2. Household work,
3. Voluntary work,
4. Child care,
5. Leisure
Constraints
1. Resource
2. Technology
3. Legal & Socio-Culture
Relationship Between HH Activities, Goal &
Constraint
The way we consume has both direct and indirect impacts on the
environment.
Mapping our patterns of consumption is not straightforward
The energy, materials and resources we use have direct and
indirect impacts on the environment.
Every stage of the food production chain - from growing crops,
raising livestock or catching fish, to transportation and storage,
manufacturing, distribution, purchasing, consumption, and
dealing with waste - has environmental effects.
Higher disposable incomes, longer distances between home, work
and school, more shopping and leisure activities, and deteriorating
public transport which is becoming more and more expensive, are
all factors in the shift towards the private car in recent decades.
The number of households with two or more cars is on the rise.
Why household consumption matters
The Importance of Consumption Data
1. To evaluate the wellbeing of the population or sub-group of the
population
2. To estimate behavior of the population or group when there are changes in the environment
and policy that changes the goods and services availability
3. To identify methods to enhance well-being of the population or
groups
4. To evaluate the possibility of developing/ preserving resources needed for economic and social
development
Production/Consumption Model
Production
Human
Capital
Good and
services
for sale/ gift/
exchange
Input
Commodity Consumption Well-being