Economic Consumption Analysis – Micro and Macro Level Consumption – How to run a family in economically


“Consumption is the sole end and object of economic activity”

– J. M. Keynes


Consumption is an essential economic
activity. The quantity and quality of
consumption determine the standard of living of the people. Consumption is the act of satisfying one’s wants. Consumption is defined as “the use of goods and services for satisfying wants”. In economics, consumption
is studied both at micro level and macro level.

Consumption is the beginning of economic science. In the absence of consumption, there can be no production,exchange or distribution. Consumption is also an end of production. Producers produce goods to satisfy the wants of the people.

Human Wants:

In ordinary language desire and want
mean the same thing. But in Economics they have different meanings. Wants are the basis for human behaviour to buy and consume goods.

Characteristics of Human Wants:

a. Wants are unlimited:

Human wants are countless in number and various in kinds. When one want is satisfied another want crops up. Human wants multiply with the growth of civilization and development.

b. Wants become habits:

Wants become habits; for example,when a man starts reading news paper in the morning, it becomes a habit. Same is the case with drinking tea or chewing pans.

c. Wants are Satiable:

Though we cannot satisfy all our wants, at the same time we can satisfy particular wants at a given time.When one feels hungry, he takes food and that want is satisfied.

d. Wants are Alternative:

There are alternative ways to satisfy
a particular want eg. Idly, dosa or chappathi.

e. Wants are Competitive:

All our wants are not equally important. So, there is competition among wants. Hence, we have to choose more urgent wants than less urgent wants.

f. Wants are Complementary:

Sometimes, satisfaction of a particular want requires the use of more than one commodity. Example:Car and Petrol, Ink and Pen.

g. Wants are Recurring:

Some wants occur again and again. For example, if we feel hungry, we take food and satisfy our want. But after sometime, we again feel hungry and want food.

Classification of Goods:

Goods are broadly classified into three categories.


Goods which are indispensable for the human beings to exist in the world are called “Necessaries”. For example, food,clothing and shelter.


Goods which are not indispensable for life but to make our life easy, convenient and comfortable are called “Comforts”. Example: TV, Fa


Goods which are not very essential but are very costly are known as “Luxuries”.

Example: Jewelry, Diamonds and Cars. However, for people with higher income they may look necessaries or comforts.

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