How is consumption determined?

  The first impression of a country’s economy is by looking at the gross domestic product (GDP), the gross amount of profit made by a country in a year, in terms where consumption plays a large role. Hence, much effort is inserted by the government to estimate and improve consumption.

  From the dictionary of economics, consumption is defined as “the using up of goods and services having an exchangeable value”.  The needs of the customers vary and changes along with the products sold, thus, how do we determine consumption?

  Consumption can be determined by the durability of the product, durable products such as televisions and non-durable products such as food are separated in consumption, as they have different influences on the business.

  The categorizing of the product- the ten chapters of expenditure can be also used to determine the consumption rate accordingly to the field of needs the product fulfills. These ten chapters are:

1. Food

2. Clothing and foot wear

3. Housing

4. Heating and energy

5. Health

6. Transport

7. House furniture and appliances

8. Communication

9. Culture and schooling

10. Entertainment

 Consumption from people can be estimated by identifying the classes of the consumer and the development of the society. Different classes of consumer have different amount of income, therefore different level of consumption.

  The rich usually has higher spending levels than the poor. They tend to buy better products than the poor due to different rules of decision making. Their consumption are varies along with the society and are more vulnerable to advertisements. 




References:1. "Consumption: A Key Concept in Economics." Consumption: A Key Concept in Economics. N.p., n.d. Web. 24 Jan. 2013. <http://www.economicswebinstitute.org/glossary/cons.htm>.2. "Economics: GDP." Economics: GDP. N.p., n.d. Web. 24 Jan. 2013 <http://www.cliffsnotes.com/study_guide/GDP.topicArticleId-9789,articleId-9733.html>.3. "Product Differentiation. N.p., n.d. Web. 24 Jan. 2013 <http://www.economicswebinstitute.org/glossary/product.htm>.