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“Infinite growth of material consumption in
a finite world is an impossibility.”
E. F. Schumacher

Main Topics

Consumption is a common concept in economics, and gives rise to derived concepts such as consumer debt.

Generally consumption is defined by opposition to production. But the precise definition can vary because different schools of economists define production quite differently. According to some economists, only the final purchase of goods and services constitutes consumption, and every other commercial activity is some form of production. Other economists define consumption much more broadly, as the aggregate of all economic activity that does not entail the design, production and marketing of goods and services (e.g. "the selection, adoption, use, disposal and recycling of goods and services").

Likewise, consumption can be measured by a variety of different metrics such as energy in energy economics. The total consumer spending in an economy is generally calculated using the consumption function, a metric devised by John Maynard Keynes, which simply takes the aggregate disposable income and multiplies it by a "marginal propensity to consume". This metric essentially defines consumption as the part of disposable income that does not go into savings. But disposable income in turn can be defined in a number of ways - e.g. to include borrowed funds or expenditures from savings.

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Classification of Individual Consumption by Purpose (COICOP) is a Reference Classification published by the United Nations Statistics Division that divides the purpose of individual consumption expenditures incurred by three institutional sectors, namely households, non-profit institutions serving households and general government.

Correspondence with CPC is available; Division 13 of COICOP corresponds to Classification of the Purposes of Non-Profit Institutions Serving Households (COPNI); Division 14 of COICOP corresponds to Classification of the Functions of Government (COFOG).

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Consumer theory is a theory of microeconomics that relates preferences to consumer demand curves. The link between personal preferences, consumption, and the demand curve is one of the most complex relations in economics. Implicitly, economists assume that anything purchased will be consumed, unless the purchase is for a productive activity.

Preferences are the desires by each individual for the consumption of goods and services, and ultimately translate into employment choices based on abilities and the use of the income from employment for purchases of goods and services to be combined with the consumer's time to define consumption activities.

Consumption is separated from production, logically, because two different consumers are involved. In the first case consumption is by the primary individual; in the second case, a producer might make something that he would not consume himself. Therefore, different motivations and abilities are involved.

The models that make up consumer theory are used to represent prospectively observable demand patterns for an individual buyer on the hypothesis of constrained optimization.

Prominent variables used to explain the rate at which the good is purchased (demanded) are the price per unit of that good, prices of related goods, and wealth of the consumer.

The fundamental theorem of demand states that the rate of consumption falls as the price of the good rises. This is called the substitution effect. As prices rise, consumers will substitute away from higher priced goods and services, choosing less costly alternatives. Subsequently, as the wealth of the individual rises, demand increases, shifting the demand curve higher at all rates of consumption. This is called the income effect. As wealth rises, consumers will substitute away from less costly inferior goods and services, choosing higher priced alternatives.

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Cultures of Consumption was a 5 year, £5 million research programme that studied consumption in a global context. It ran from 2002 to 2007.

Research ranged from the consumption of public services in Britain to the consumption of drugs in East Africa, from the fashionable West End of London to the commodification of water and cosmopolitan citizenship.

The research programme was jointly funded by the Economic and Social Research Council and Arts and Humanities Research Council, and brought together leading researchers from the social sciences and the arts and humanities.

For a short overview of research findings, click here:
4 1/2 Lessons about Consumption, by Professor Frank Trentmann

To go direct to details of and findings from the 26 research projects, click here:
Projects



The paradox of thrift (or Paradox of Saving) is a paradox of economics propounded by John Maynard Keynes. The paradox states that if everyone saves more money during times of recession, then aggregate demand will fall and will in turn lower total savings in the population because of the decrease in consumption and economic growth.

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Over-consumption is a theory related to overpopulation, referring to situations where per capita consumption is so high that even in spite of a moderate population density, sustainability is not achieved. The theory was coined to augment the discussion of overpopulation, which reflects issues of carrying capacity without taking into account per capita consumption, by which developing nations are evaluated to consume more than their land can support. Green parties and the ecology movement often argue that consumption per person, or ecological footprint, is typically lower in poor than in rich nations.

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Brazil's Rousseff says Petrobras can 'turn page' on scandal 24 Apr 2015, 11:53 pm

Brazilian President Dilma Rousseff, pictured in Brasilia on April 24, 2015, said that the release of financial results which showed Petrobras lost $2.1 billion to corruption would allow the state oil giant to "turn a page" on a graft schemePresident Dilma Rousseff said Friday that the release of financial results which showed Petrobras lost $2.1 billion to corruption would allow the state oil giant to "turn a page" on the largest graft scheme in Brazilian history. Petrobras on Wednesday released its long-delayed audited accounts of a growing scandal that has enveloped the company, triggered the resignations of its chief executive and entire board and badly wounded Rousseff's government. Stock markets have reacted positively to the publication of the 2014 financial results -- an attempt by Petrobras to claw back confidence -- after a delay of months.


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Historic week for US stocks as Nasdaq breaks 15-year record 24 Apr 2015, 11:21 pm

The Nasdaq composite index is viewed in Times Square on April 23, 2015 in New YorkFifteen years after its bubble exploded dramatically costing tens of thousands of hopeful tech millionaires their savings, the Nasdaq finally made its way back this week. The Nasdaq led Wall Street higher for the week through April 24, putting on 3.25 percent. Then, with a flourish from both the old and new leaders of the New Economy (as it was heralded before the 2000 crash) -- Amazon, Microsoft and Google all surged on strong quarterly earnings reports -- the Nasdaq Composite added to that Friday with another 36 points, to end the week at 5,092.08. Back in 2000, the p/e ratio was an unsustainable 190 times, mainly because the Nasdaq was full of new tech companies full of hopes and ideas but no earnings.


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Greece under fire from creditors as bailout talks drag 24 Apr 2015, 10:08 pm

Members of the PAME Communist-affiliated union demonstrate against a decree by Greece's radical left-led government that forces state entities, including hospitals, municipalities and universities, to lend their reserves to the cash-strapped state, in central Athens on Friday, April 24, 2015. Parliament was debating a law retroactively approving the decree later Friday. (AP Photo/Petros Giannakouris)RIGA, Latvia (AP) — European creditors turned up the heat on Greece Friday to deliver an economic reform program that it needs to avoid a possible default and even an exit from the euro.


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A. One good method to learn how to trade, especially forex, is to use binary options, an increasingly popular type of global trading tool. This popularity comes with the ease to trade with a simple “yes” or “no” on whether a market will be up or down within an expiration time that will be usually between five and 30 minutes. But due to high market growth brokers multiplied, therefore choosing the right binary options platform is paramount. Be aware of those firms licensed offshore and falling outside the strict standards and regulatory framework provided by United States, Europe and Australia Governments.


B. In these times of recession, it’s difficult to see how and when the car industry will recover. But 2 main contrasting factors are worth a mention:

1. There has been a considerable raise in second hand cars sales in most of the world in the recent past. This fact has mainly 2 reasons.
On the demand side the current financial crisis, facing most of the world, has pushed many people toward used motor cars due to budget constraints. On the supply side, the rising fuel prices have also boosted second hand cars sales, as many people opt to sell off the fuel guzzlers they had bought earlier when fuel cost was not a major issue.

2. Since the problem is that people don’t have enough money to buy cars upfront, it has been registered an increase of the offer of car leasing or contract hire deals where customers lease their car on a monthly basis until the cost has been paid off. The availability of these deals means that buyers have more choice and they can focus on a car that would normally be out of their price range, which means more money for the car manufacturers in the long run. This kind of contract offers to the consumer not only a wider choice of more desirable cars, but also a payment in manageable instalments and often a plenty of other benefits like servicing costs and road tax ... and finally a hassle-free life for customers.
 

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