Download - Consumption Theory
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WELCOME TO
THE PRESENTATION
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Course No: Soc 2105
Course Title: Economy and Society
Presented By:
Alok Roy
ID- 151646
2nd Year 1st Term
Sociology Discipline
Khulna University
Khulna
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A Presentation On….
“consumption”
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Presentation outline1. Meaning of consumption.
2. Etymology.
3. Definition of consumption.
4. Types of consumption.
5. Importance of consumption.
6. Variables of consumption.
7. Theory of Alfred Marshall.
8. Theory of Thorstein Veblen.
9. Theory of Keynes.
10. Theory of Norrish.
11. Determinants of consumption.
12. Social Structure and Consumption.
13. How consumption related with Sociology.
14. References.
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Consumption
Consumption is a major concept in economics and also
studied by many other social science. Economists are
particularly interested in the relationship between
consumption and income, as modeled with the
consumption function.
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Meaning of consumption
Consumption is the process in which the substance of a
thing is completely destroyed, used up, or incorporated or
transformed into something else. Consumption of goods
and services is the amount of them used in a particular
time period.
(www. Bussinessdictionary.com)
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Etymology
The term consumption derived from old French word,
“consumpcion” and Latin word, “consumptionem”
(www.etymoline.com)
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Definition of consumption
Different schools of economists define consumption
differently.
According to Encarta Encyclopedia,
“The purchase and use
of goods and services by consumers or the quantity of goods
and services purchased”.
According to David Jary and Julia Jary,
“The process in
which goods or services are used to satisfy economic needs”.
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Definition of consumption
cont’d
According to Merriam- Webster Learner’s Dictionary,
“The act of
eating or drinking something: the use of something: use by a
particular group of people”.
In simple words, consumption is defined as destruction of that
utility through use. Consumption means demand for consumer
goods and services by households.
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Types of consumption
Direct or final consumption:
Consumption is known as direct or final consumption,
when the goods satisfy human wants directly and
immediately. The goods have reached their final
destination, e.g. wearing a shirt or eating a mango.
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Types of consumption
Indirect or productive:
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
directly, e.g. using a sewing machine for making cloths.
cont’d
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Importance of consumption
Modern economists emphasize much on it-
Beginning of all economic activities: Consumption is the
beginning of all human activities consumption also means the
satisfaction of human wants.
End of all economic activities: Consumption is not only the
beginning of all economic activities it is also the end of all
economic activities.
Index of standard of living: The consumption pattern of a
person; i.e. what he eats, what he wears etc. give us the
knowledge of the standard of living of the person.
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Importance of consumption
cont’d
Consumption is the source of production: Production increase with
the consumption. It is consumption of goods that necessities their
production.
Importance in economic theory: The study of consumption has
contributed much in the formulation of certain economic principles.
Importance for the government: The government formulates its
economic policies on the basis of the consumption habits of the people.
Importance in income and employment: Consumption plays an
important role in the determination of income, output and employment
in a country.
(www.yourarticlelibary.com /Smriti Chand)
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Variables of consumption
Sociological and other variables impinge on different
kinds of consumption.
1.Sex: Women consume less than men.
2.Age: Children consume less than adults.
3.Ecology: Rural populations consume more than urban
populations, products differentiation is greater in urban
areas.
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Variables of consumptioncont’d
4. Economic resources:
Those near the starvation level spend almost all
their increments of income on food; above this
level, “Engel’s Law” takes effect and with
increments of income a smaller proportion is spent
on food; then in the upper reaches, where sedentary
occupations dominate, the absolute amount spent for
food may actually decrease in some cases.
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Variables of consumption
cont’d
5.Occupational status of family members:
As the income of family increases at middle-income
levels, the proportion of income spent on food
diminishes; but if this increase results from the fact that a
wife takes a job, the proportion spent on food may
increase because of reliance on more service costs on
food (for example, restaurant meals and frozen foods).
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Variables of consumption
cont’d
6. Social class:
In our society who belong to upper class consume more than the
lower class people.
7. Income:
People who have higher income consume more than lower income
people.
8. Physical fitness:
Physically fit people consume more than the other people.
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Variables of consumption
cont’d
9. Power:
More powerful people in our society consume more than other’s.
10. Social status:
People who have higher social status consume more than the peoplewho have lower status.
11. Family:
Extended family consume more than nuclear family.
12. Political power:
Politically powerful people consume more than the powerlesspeople.
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Theories of
consumption
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The Theory of Alfred Marshall
on
consumption
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Alfred Marshall:A Brief Biological Sketch
Alfred Marshall (26 July 1842- 13 July 1924) was one of themost influential economist of his time. He was born in London.His father was a bank cashier and a devout Evangelical. He waseducated at the Merchant Taylor’s School and St. John’s College,Cambridge.
Major books:
The Economics of Industry- 1879.
Principle’s of Economics- 1890.
Industry and Trade- 1919.
Money, Credit and Commerce- 1923.
(Wikipedia,2016)
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Theory of Alfred Marshall on
consumption
Marshall indicated that many human wants are structured in
relation to cultural and social patterns. His connection between
wants and activities led to this insight. Marshall recognized the
existence of certain necessaries for subsistence and for different
occupation.
Limitations:
In his theory something besides residual wants, determined
demand, wants depend in part on the type of civilization in which
the economy is embedded.
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Theory of Thorstein Veblen
on
Consumption
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Thorstein Veblen:A Brief Biological Sketch
Thorstein Bunde Veblen (July 30, 1857- August 03,1929) was a
Norwegian- American economist and sociologists. He was famous as a witty critic of
capitalism. He was the fourth of twelve children in the Veblen family.
Books:
The theory of the Leisure Class- 1899.
The theory of Business Enterprise- 1904.
Imperical Germany and the Industrial revolution- 1915.
The Engineers and the Priu System- 1921.
The vested interests and the common man- 1919.
(Wikipedia,2016)
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Theory of Thorstein Veblen
cont’d
In Thorstein Veblen’s theory of conspicuous consumption, that
something's besides randomly assorted individual wants
determined the nature of demand.
Veblen argued choose their patterns of expenditure to underline,
symbolize and fortify their class position vis-à-vis the rest of the
community.
Again, this marks the introduction of social variable into the
concept of demand.
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Theory of John Maynard Keyens
on
Consumption
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Keynes:A Brief Biological Sketch
John Maynard Keyens (5 June, 1883- 21April, 1946) was an Englisheconomist whose ideas fundamentally changed the theory and practice ofmacro- economics and the economic policies of govt. John Maynard Keyneswas born in Cambridge, England to a upper- middle class family. His fatherwas an economist and a lecturer in Moral Sciences at the University ofCambridge and his mother was a local social reformer.
Contribution:
Macroeconomics, Keynesian economics, Liquidity preference, Spendingmultiplier.
Books:
1913- Indian Currency and Finance.
1914- Luwig Von Mises’s Theori des Gelds.
1919- The Economic Consequences of the Peace.
(Wikipedia, 2016)
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Theory of Keynes
cont’d
The work of Keynes brought into focus the balance between
consumption and savings. His theory of consumption and
savings rests on what he called a “Fundamental
Psychological Law” whereby when (any modern
communities) real income is increased (the community) will
not absolute amount must be saved.
[General Theory of Employment,
Interest and Money (New York; Hareaurt Brace,1936)
p.97]
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Theory of Keynes
cont’d
A serious challenge to the Keynesian postulate is found in
Duesenberry’s theory of consumption. Basing his case on
general sociological and economic evidence, he challenged two
of Keynes’s assumptions:
1.That every individual’s consumption behavior is independent
of every other individual and
2. That people who have recently fallen from a higher income
level to a given income will spend and save in the same manner
as people who have risen from a lower income level to the same
level.
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Theory of Keynes
cont’d
Limitations:
Keynes theory can’t brings many structural variables to
bear on consumption.
While Keynes admitted that factor other than this may
affect savings.
He did not give them a formal places in this theory.
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Theory of Ronald George Wreyford Norrish
on
Consumption
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Norrish: A Brief Biological Sketch
Ronald George Wreyford Norrish (9 November,
1897- 7 June 1978) was a British Chemist who was
awarded the Nobel Prize in Chemistry in 1967.
Norrish was born in Cambridge and was educated at
the Perse School and Emmanuel College, Cambridge.
He was a former student of Eric Rideal.
(source: Wikipedia, 2016)
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Theory of Norrish
cont’d
From time to time economists have expressed dissatisfaction
with deductive theories of diminishing marginal utility and
indifference curve analysis. Norrish for instance argued that
consumption theory should not be based on diminishing
marginal utility or any alternative of that theory. Rather she
distinguished among short term purchase according to type of
expenditure-
1. Those expenditures that involve no calculation such as legal
obligations (e.g. rent), forced savings for Chrismas clubs,
income taxes, insurance health plans and so on.
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Theory of Norrish
cont’d2. Areas in which careful weighing occurs as in investment incertain stocks on the exchange.
3. A “dynamic” residual in which the purchaser makes sporadicexperimental purchases.
Modigliani, Blumberg and Ando held that consumption is afunction of current and expected income and assets. Again theexpected income is influenced by such factors as age of retirementand the age distribution of the population.
Limitations:
The sociological variables these theory incorporate are limited togross demographic indeed.
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Determinants of consumption
Combining all the theories of consumption, we can
conclude that consumption depends on-
- Current income
- Expected future income
- Wealth
- Interest rate
(www.csub.com)
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Social Structure and Consumption
In various sociological dimensions (social class, race)
are differently involved in social structure. This
structure impinge on there spending patterns-
At a gross level (for instance saving spending ratio).
At a detail level (the kinds of consumer items used
to symbolize sex roles).
Thus we would note sex, marital status, age and
position in the class structure.
Sociological and other variables impinge on different
kinds of consumption (sex, age, ecology, economic
resources).
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How consumption related with
Sociology
Consumption is a sub- field of sociology. Within this sub-
field, Sociologists see consumption as-
- central to daily life
- identity
- social order in contemporary societies.
Due to its centrality to social life sociologists recognize
fundamental and consequential relationships between
consumption and economic and political systems and to
social categorization group membership, identity,
stratification and social status.
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How consumption related with
Sociologycont’d
Consumption is thus interested with issues of-
- power and inequality
- is central to social process
- situated within the sociological debate surrounding
structure and agency.
- and a phenomena that connects the micro- interactions
of everyday life to larger- scale social patterns and trends.
(www.sociology.about.com)
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How consumption related with Sociology
cont’d
The sociology of consumption also concern about the-
- Questions of labor
- Industry
- Production unit
- Social, legal or economic institutions
- Technology
- Social class
However in the last few decades researchers have increasingly situated practicesof consumption for understanding broader, social and cultural change, impactingon the way sociologists have conceptualized such diverse areas of social changeas cultural and economic inequality, urban and spatial development, identity andselfhood, gender relations and performativity, media and advertising.
(www.oxfordbibliographies.com)
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References
1. www. Bussinessdictionary.com/consumption/2016.
2. www.etymoline.com/meaning of consumption/2016.
3. Collins Dictionary Dictionary of Sociology by David Jaryand Julia Jary, 2000. p- 110.
4. www.yourarticlelibary.com /Smriti Chand/economics article/2016.
5. General Theory of Employment, Interest and Money (New York; Hareaurt Brace,1936) p.97
6. www.oxfordbibliographies.com
7. www.sociology.about.com/consumption theories.
8. www.csub.com/ about consumption/.
9. Wikipedia the free encyclopedia, 2016.
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Thank You.