Consumption
From Economypedia.com
Consumption is described as utilizing a service or product until its economic value is exhausted. It can also be described as aggregate expenditure on personal consumption that manifests itself on buying of goods and services. Expense required is sourced from either savings, income or even from borrowed funds. Consumption denotes that portion of disposable income that is not saved by an individual.
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[edit] Consumption function
It is a mathematical formula composed by economist John Maynard Keynes. Consumption function exhibits interrelationship between consumer spending and real disposable income. Its mathematical formula is:
C=A+MD
where C= Consumer spending,
A=Autonomous consumption,
M=Marginal propensity to consume
D= Real disposable income
Consumption function is overly dependent on M remaining constant. Consumers are seen to spend increasingly smaller percentage of their disposable income as it increases. This creates a curve effect at greater income scenarios.
[edit] Autonomous consumption
It is described as consumption quantum that would be present even if a consumer had no source of income at all. A person's autonomous consumption ascertains his or her real wages or real income.
Examples of autonomous consumption include food, house rent, and electricity. In case, a person's income suddenly ceases to exist, he or she is compelled to take money from savings to meet these financial obligations.
[edit] Marginal propensity to consume
It is an economic term for quantum that consumption varies in answer to progressive change in disposable income. Marginal propensity to consume is equal to variation in consumption divided by variation in disposable income that is effect of change in consumption.
[edit] Standard of living
It is described as financial health of a population as appraised by consumption quantity of members of that specific population. Commonest examples of measuring standard of living is gross national income per capita.Major flaw in standard of living computation is that it does not take into account hard to quantify factors like environmental impacts and crime rates. [1] [2]
[edit] See also
[edit] References
[edit] External links
- Article in Faostat.fao.org
