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8 May, 2015 - 11:47

Consumption is what individuals (or households) want to (or plan to) buy. Their ability to consume is entirely dependent on their income. What is not consumed (in income) is set aside for future consumption: this is saving.

What is of interest is not the physical consumption, such as the use of a car, but the time pattern of purchases. If members of a family need to drive to work, they will have to have a car whether it is brand new or very old. The purchase of the car can be postponed. What prompts a family to buy a car now is a great interest to economists: such purchase is consumption.