# consumption

I came - I saw - I bought - € 1 - information sign

Under consumption ( latin consumere "consume") of the consumption or consumption is understood of goods in general. In the economic sense, the term stands for the purchase of goods for private use or consumption by consumers (households). In business terms , the output of goods is often referred to as consumption.

The umbrella term consumption includes meanings that do not fall under the concept of consumption.

## Development of consumption

Consumption has existed since mankind, because goods have always been consumed. In ethnology , all social units of a society in which consumption takes place are called the consumer community . These are primarily households, as well as clans, village communities and special-purpose associations. The common consumption that goes beyond the household strengthens the social cohesion of the group.

### 15th and 16th centuries

A consumer society (in which consumption is individualized and more important than the social component) first developed in England in the 15th century , when, among other things, the emergence of new printing technologies and the cotton trade caused consumption to grow significantly. A consumer society is characterized by the fact that people not only consume or buy what they need to survive, but also the “beautiful” things in life.

### 18th century

In the 18th century the population bought what they could not produce at weekly and annual markets. There were no fixed prices , it was traded. With luxury goods such as fine spices and exquisite fabrics, initially only the nobility consumed prestige . In the course of time the bourgeoisie emancipated themselves and with it their purchasing power grew . Human interest evolved from need to desire . It was consumed to represent something . In Britain, industry grew and jobs were created in the early 18th century. Due to the associated increase in the income of the bourgeoisie, the demand for mass consumer goods , such as beer, tea, soap and printed clothing, increased. Fashion journals became the most successful means of communication for consumer society and led to an increase in consumer needs . Other magazines soon followed suit. In addition to Great Britain, France, Germany and Holland were influenced by this revolution.

### 19th century

The advertising pillar was an innovation in the middle of the 19th century . It offered plenty of space for advertising and was an important means of increasing sales . The development of advertising in newspapers, magazines and shop windows has steadily increased consumption. The industrialization in Europe and North America created complex production, transport and information networks. At the end of the 19th century, the first consumer houses were built, which were characterized by fixed prices. As a result of the increased supply, consumer wishes and desire to consume grew.

### 20th and early 21st century

The economic miracle and the mass consumption associated with it began with the reconstruction of Germany after the Second World War . The luxury goods mentioned above became mass-produced goods. International goods also came onto the market in the 1950s and the globalization of consumption began. In the 1960s the market for electrical appliances boomed, in the 1970s the market for plastic furniture, valuable raw materials and energy sources. In the 1980s, a kind of luxury addiction develops. Wealth and beauty became more important. The World Wide Web is developing an innovative dimension in consumption. This made it possible to order directly from producers in other countries. Consumption became a leisure activity for many people. "The Federal Association of German Mail Order Sales assumed that consumers in Germany spent 16.8 billion euros on purchases on the Internet in 2007 - and the trend is rising."

Another current trend is the politicization of consumption . Companies try to add a political dimension to their products and upgrade them ( greenwashing campaigns such as the rainforest project of the Krombacher beer brewery, 2008), the media draw attention to the political consequences of certain consumer behavior and NGOs call for certain consumer behavior or boycott behavior (as in the Shell boycott , 1995).

Many studies emphasize the effect of global consumption on climate change . In the State of the World Report 2010, the Worldwatch Institute points out that global consumption is “number one climate killer”. For example, if everyone on earth lived like the Americans , the planet could only feed around 1.4 billion people.

## Advertising, marketing and promotional services

Consumption sales are increased with targeted measures by the product manufacturing industry. Marketing , advertising and sales promotion are the instruments used to promote sales.

## Consumption within the framework of economic theory

The closed economic cycle with no state activity

To describe consumption it is necessary to explain the relationship between businesses and households. This relationship is described in national accounts .

### Consumption in the national accounts excluding savings and the state

An example to illustrate this relationship is the closed economic cycle without government activity. Households provide work to companies with which companies produce goods. These are bought and consumed by households. With the help of the goods consumed, households are able to perform further work and the companies continue to produce and generate sales, which in turn enables them to reward work with income (Y). With the help of this, households can in turn pay consumer spending to companies. The simplified representation assumes that households do not save anything on their income. So they spend everything to buy consumer goods again and pay consumer spending (C). Thus, the entire leaves GDP , or the total income of all of the economic operators (Y) as addition of private consumption expenditure (C) and investment spending (I) represent: . ${\ displaystyle Y = C + I}$

### Consumption in the national accounts with savings

The previous model can be expanded to include the option of saving, but without the state. The part of the income that is not spent on buying consumer goods is called savings (S). Then the household income is the sum of consumer spending and saving . This makes it a macroeconomic balance comes, the savings (S), ie the difference between income (Y) and consumption (C) must be equal to expenditure on investments: . Mathematical derivation: ${\ displaystyle Y = C + S}$${\ displaystyle S = YC = I}$

1. ${\ displaystyle Y = C + I}$- subtraction from C
${\ displaystyle I = YC}$
2. ${\ displaystyle Y = C + S}$ - subtraction from C
${\ displaystyle S = YC}$
3. ${\ displaystyle S = I}$ - Equate S and I.
${\ displaystyle S = YC = I}$

### Consumption in the national accounts with state excluding foreign countries

Furthermore, in equilibrium, production (Y) corresponds to demand for goods (Z). The aggregate demand for goods can be calculated by adding up consumption (C), investment (I), government expenditure (G) and the external contribution to GDP ( ). Since there is no external contribution in a closed economy , EX-IM = 0 applies. Thus, the demand for goods with the following leaves identity equation represent: . The demand for goods by households (Z) depends on consumption and thus on income. However, equilibrium is only established if and therefore: ${\ displaystyle EX ({\ text {Export}}) - IM ({\ text {Import}})}$${\ displaystyle Z = C + I + G}$${\ displaystyle Y = Z}$

${\ displaystyle Y = Z = C + I + G}$
${\ displaystyle C = c_ {0} + c_ {1} \ cdot Y_ {D}}$
${\ displaystyle Z = c_ {0} + c_ {1} \ cdot Y_ {D} + I + G}$

### Demand-theoretical aspects

The purpose of any economy is to satisfy needs. Private households are therefore supplied with the consumer goods they demand. The demand for one good in comparison to another is regulated by the price. Furthermore, demand is influenced by the benefits that the goods create, the needs of the people and the income available to households. Consequently, household consumption also depends on the above factors. If the price of a good rises and / or income falls, household demand generally falls.

### More theories

The demand theory aims not only at increasing consumption as the actual determinant of economic growth, but generally at a balanced and adequate demand for consumer and capital goods. The purchasing power theory can be seen in this sense as a theory, according to which a reasonable economic growth in a balanced income distribution is obtained.

## Breakdown of consumer spending

Consumption is an aggregate of the gross domestic product according to the national economic accounting . Consumer spending is divided into three parts:

• Private consumption expenditure (private consumption); this includes all purchases of goods and services by private households (private households of entrepreneurs, employees, pensioners, unemployed) and self-employed sole proprietorships such as innkeepers and freelancers in Germany. Durable goods such as furniture and vehicles are consumer goods. In general, according to the ESA, property purchases are included in capital expenditure in the GDP calculation.
• Consumer spending by private organizations such as churches, trade unions.
• Government consumption expenditure ( government consumption ); this includes all services that the state does not offer on the market. All running costs such as the salaries for teachers and civil servants are considered government consumption.

## Consumption in the business sense

In a business sense, consumer goods and production goods differ . The consumer goods are output goods , while the production goods enter the production process as input goods , which in turn can ultimately be part of consumer goods. The consumption of raw materials , consumables and supplies in the business process is referred to in business cost accounting as depreciation or costs .

## literature

• Kurt E. Becker (Ed.): Consumption. Peter Lang Verlag, Frankfurt am Main et al. 1992, "Basics" series, edited by Alphons Silbermann , ISBN 3-631-42402-7 .
• Olivier Blanchard , Gerhard Illing : Macroeconomics . 6th edition, Pearson Studium, Munich 2014, ISBN 978-3-86894-191-3 .
• Norbert Bolz : The consumerist manifesto . Fink, Munich 2002, ISBN 3-7705-3744-0 .
• Eva Illouz : The consumption of romanticism: love and the cultural contradictions of capitalism (original title: Consuming the Romantic Utopia , translated by Andreas Wirthensohn). Campus, Frankfurt am Main 2003, ISBN 3-593-37201-0 (= Frankfurt contributions to sociology and social philosophy , volume 4); as paperback: Suhrkamp-Taschenbuch Wissenschaft Volume 1858, Frankfurt am Main 2007, ISBN 978-3-518-29458-1 .
• Renate Neubäumer , Brigitte Hewel and others: Economics: Fundamentals of economic theory and economic policy. Gabler, Wiesbaden, 2nd edition.
• Rolf Walter (Ed.) Economics: An Introduction . Schöningh, Paderborn 1997.
• Wolfgang Wüst (Ed.) Regional consumption history. From the Middle Ages to the Modern Age (= Franconia 7th supplements to the yearbook for Franconian regional research), Erlangen 2015, ISBN 978-3-940049-19-3 .
• Birger P. Priddat: Economics of Persuasion. Economy between market, communication and persuasion . Metropolis, Marburg 2015.