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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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Putin says Russia not isolated over Ukraine, blames West for frosty ties 23 Nov 2014, 1:05 pm

Russian President Putin chairs a meeting of the Security Council at the Kremlin in MoscowBy Gabriela Baczynska MOSCOW (Reuters) - President Vladimir Putin blamed the West for worsening relations with Russia since the Ukraine crisis and said Moscow would not allow itself to become internationally isolated behind another 'Iron Curtain'. In an interview published by state news agency TASS on Sunday, Putin also said Western sanctions against Moscow, combined with the slide in the rouble and oil price falls would have no "catastrophic consequences" on Russia's economy. ...


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Countdown to missed opportunity for EU economy 23 Nov 2014, 11:00 am

A euro logo sculpture stands in front the headquarters of the European Central Bank in FrankfurtBy Paul Taylor PARIS (Reuters) - The countdown has begun to what threatens to be a missed opportunity to revive Europe's stalled economy. When European Union leaders meet on Dec. 18-19 under new management, they have a chance to launch a joint assault on the economic stagnation and high unemployment that are fuelling disenchantment and anti-EU protest among voters. All the signs are they are set to fall short. The 18-nation euro zone is struggling to pull out of the aftermath of its debt crisis, aggravated by the economic impact of a standoff with Russia over Ukraine. ...


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Italy regional votes to test public mood on Renzi 23 Nov 2014, 10:58 am

Italy's Prime Minister Renzi gestures during a news conference at Chigi Palace in RomeBy Isla Binnie and Gavin Jones ROME (Reuters) - Italians voted on Sunday in regional ballots which will test whether the country, tired of economic stagnation and austerity, is also wearying of Matteo Renzi's nine-month old coalition government. Renzi's popularity peaked in June shortly after a landslide victory in European parliament elections, but his ruling party has been steadily slipping lower in opinion polls since, as the economy stutters and joblessness remains stubbornly high. ...


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   Focus

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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