Why consumption is important

Consumption is regarded as the be-all and the end-all of all economic activity. In other words, consumption is the beginning as well as the end of all economic activity. It is consumption which gives the initial push to production.

Production, thus, is directed and stimulated by consumption. Not only do the consumers give initial push to production, but their desires govern the volume and direction of all productive activity throughout. If the consumers are satisfied, business prospers and production expands. But if the consumers happen to dislike a commodity or think that its price is too high, its production will sooner or later come to an end.

A consumer has been compared to a king, and his sway extends over the entire realm of economic activity. The existence of wants is the mainspring of all economic activity and then multiplying or expansion is the secret of all economic progress. Multiplication of wants and economic progress go together. Manufacturers try to find out better and more profitable methods to satisfy the consumers. This leads to the discovery of new products and new processes and the invention of new machines. Every economic effort made to satisfy one want creates more wants.

The more the wants are satisfied, the more they increase. A body of skilled workers is, therefore, built up besides successful businessmen. The all-pervading influence of consumption can be seen in all branches of Economics. Consumers direct and guide production.

Consumption thus exerts its influence on exchange also. Without consumption there would have been no exchange. Distribution, i. Standard of living determines their efficiency and on efficiency depends their shares in the national income.

Thus, the importance of consumption cannot be over-emphasized. It is all-pervasive. It affects ill economic activity and contributes to economic progress. It determines the standard of living of the people to the study of which we now turn.

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Similarly, the services of doctors, teachers, servants, mechanics, etc. The use of such services is called productive consumption because they help in producing goods and services. So is the case with machines.

There is also public consumption in which certain wants such as those for education, street lighting, sewerage, or defence are paid for collectively by the state. But when a person uses goods and services in satisfying his wants, he does not destroy them in the act of consumption.

This is because man can neither create nor destroy matter. His act of consumption simply involves the destruction of utilities. Further, all goods and services which are not paid for in their acts of use are excluded from consumption such as the use of vegetables, fruits or flowers grown in the kitchen garden, and services of the housewife.

To conclude with Prof. The classical economists did not give much importance to consumption, but the modern economists emphasize much on it and take it as an important element in economics.

Specially Jevons and the economists of his time gave an important place to consumption. In modern times, consumption is treated as an inducement on which the economic system of a country rests. The importance of consumption is explained as under. Consumption is the beginning of all human economic activities. A man feels a desire and then he makes an effort to satisfy it. When the effort has been made, the result is the satisfaction of the want Consumption also means the satisfaction of human wants.

A farmer ploughs the land and produces crops labourers work in factories and produce goods so as to get satisfaction from the consumption of goods. In fact, the main motto of every productive activity is that people consume goods and production is done for consumption, which constitute economic activities.

Consumption, therefore, is the beginning of all economic activities. Consumption is not only the beginning of all economic activities; it is also the end of all economic activities. Suppose a man is hungry and he starts preparing his food. Economic activities begin with it. After preparing food, when he consumes it, all economic activities which were started with the preparation of food, come to an end. Consumption, therefore, is the end of all economic activities.

The consumption pattern of a person, i. It is consumption of goods that necessitates their production.

In this way, the study of consumption has contributed much in the formulation of certain economic principles. The Government formulates its economic policies on the basis of the consumption habits of the people. Minimum wages and imposition of taxes are determined by the government considering the consumption requirements of the public.

From the consumption pattern of the people, the government is able to know the production of essential and non-essential commodities in the country. From the analysis of income and consumption, the government is able to know the saving capacity of the public. In modern times, consumption has been given the most important role in the income and employment theory by Keynes.

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