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