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Meaning of Consumption and their Classification

By consumption we mean the satisfaction of our want by the use of commodities and services. When we use a commodity, we really use its want satisfying quality of utility. For example when we take a glass of water to quench our thirst we are said to consume water. When we are sitting on chair in the office, we are consuming the chairs. A person is sick, he calls in a Doctor, and he has consumed the Doctor’s services. Thus, taking a glass of water means it is actual consumption of water but in case of chair and Doctor’s Services, consumption refer to utilization of chair of Doctor’s services, consumption refer to utilization of chair of Doctor’s services.

Therefore consumption can be defined as.

  1. To make use of any commodity of service for the satisfaction of our wants is called consumption.

  2. Consumption means destruction of utility.

Types of consumption:

Consumption is known as Direct of Final consumption when the goods satisfy human wants directly and immediately. E.g. taking of meals, use of furniture. On the other hand, consumption is called indirect or productive consumption when the goods are not meant for final consumption but for producing other goods which will satisfy human wants, e.g. use of fertilizer in agriculture.

Importance of Consumption:

  1. The consumption is very importance as it is the beginning as well as the end of all economic activities. A man feels desire and then the makes an effort to satisfy it when the effort has been made the result is the satisfaction of the want. Thus want is the beginning and satisfaction the end of our economic activity.

  2. The production, as an economic activity depends upon consumption. Producer is taking production of a certain good because it is going to be consumed by the consumer. Therefore consumption determines the production.

  3. The intensity of consumption of particular goods determines the price in a market. Thus consumption also influences the exchange activity. The existence of exchange in an economy is due to consumption only.

  4. Distribution, i.e. sharing of incomes to landlords, capitalist labour and organizer is also influenced by consumption. Consumption indicates standard of living and standard of living determines the efficiency. Efficiency determines the share in the national income.

Current Category » Introduction to Agriculture Economics