Basis of consumption

• Have you been in these places?

• What can be found in these places?

• What do you usually do in these places?

Interrelationship of Production and Consumption

Production Consumption

Relationship of Consumption and Production

• Consumption deals with buying using goods and services to satisfy our human needs

- it is a major concern of economics in which the different activities of man depend• Production is the act of producing goods and

services-it must respond to what will buy and use

Relationship of Consumption and Production

• Consumption cannot be separated from production, which depends entirely on consumption.

• If there is no consumption, there is no production since they complement each other

• The success of consumption is also a success of production

Types of Consumption

1. Direct - it happens when an individual satisfies

himself upon buying and using a certain product

E.G.: Mr. X buys a drink because he is thirsty is an act of consumption. And after drinking he feels satisfied, then it is direct consumption

Types of Consumption

2. Productive Buying goods to be used in producing

other goods. In buying goods, these goods needs to be processed to further produce other goods.

E.G.: Mrs. Dela Cruz bought a textile to make dresses, shorts, shirts, or curtain

Types of Consumption

3. WastefulBuying things that do not give satisfaction

to a person

E.G.: When you buy thing to imitate others or feel envy of persons who use such products

Types of Consumption

4. Harmful Today, many and use prohibited drugs,

alcoholic drinks and cigarettes. Eve if these give them satisfaction, they are harmful and can endanger their health.

Factors That Influence Our Consumption

1. Income - Money received in exchange for producing

goods and services. Our consumption depends on how much income we have. According to Ernst Engel in his Law of Consumption, a large portion of the income is spent for basic needs when income is low. But when income goes higher, a lesser is spent on food while bigger is spent in buying things other than food.

Factors That Influence Our Consumption

2. Occasion the celebration of any occasion make

people buy and give gifts to their loved ones.

E.G.: Flowers and chocolates are in demand during Valentines and Christmas; Dresses, shoes and jewelries during birthday and anniversaries.

Factors That Influence Our Consumption

3. Advertisements Advertisement is a way of motivating and

convincing consumers to patronize certain products.

Ways to Present the Product for Advertisement a) Bandwagon Effect – makes people join the

rest in patronizing the product b) Testimonial – presents the endorsement

made by well known personality or a celebrity

c) Branding- shows the good characteristic of the product

Factors That Influence Our Consumption

4. Pricesthis is a factor that limits consumption.

People tend to ask for the price before buying.Price is the amount to be paid in buying goods or services

Factors That Influence Our Consumption

5. Values attitudes, behavior, and values affect our

consumption. If we value thriftiness, we plan out the

things we need to buy and as a result we not become impulsive buyers.

Factors That Influence Our Consumption

6. Seasonsit affects our consumption since some

things are bought depending on the weather.

E.G.: we buy umbrella and jacket during rainy seasons.

Factors That Influence Our Consumption

7. Imitation/Bandwagon Effectas we imitate what the other people buy,

we consume more of the same product. Sometimes it is the reason why people buy and use the same products that they in others.We want to consume the things that our idols, friends and neighbors consume.

LAWS ON CONSUMPTION

1. Law of VarietyAccording to this law, we have a greater satisfaction if we use a variety of products rather than use only one product.

E.G.: We eat different kinds from breakfast to dinner so that we will have greater satisfaction.

LAWS ON CONSUMPTION

2. Law of Harmony We buy products that complement each

other because this is the way we attain greater satisfaction.E.G.: Eating Kare-kare together with bagoong .Wearing dress that complement our shoes or bags especially ladies because they feel more satisfied.

LAWS ON CONSUMPTION

3. Law of Imitation -we feel happy when we imitate other

people especially celebrity we admire most. We imitate the food they eat, the clothes they wear, and even their habits.

LAWS ON CONSUMPTION

4. Law of economic order. Mores satisfaction is achieved when

people are able to patronize the vital need first over the secondary needs.

E.G.: we buy food instead of jewelry.

LAWS ON CONSUMPTION

5. Law of Diminishing Marginal Utility Utility refers to the satisfaction achieved in consuming goods and services.

• Marginal Utility and Total Utility are two classification of utility. The first one is the added satisfaction you get while the latter is the entirety of satisfaction you get in buying and using the products.

E.G.: when a hungry person eats the first serving of fried chicken, he may still want another one. After that, he may ask for another fried chicken. He may do up to the fifth serving or until hunger is satisfied. But his satisfaction from the 1st and 2nd serving is not the same when consumed the 3rd up to 5th servings. This is because the total utility increases for every consumption but if it is continuously done w/o any interval, marginal utility becomes lower as we reach our saturation point in consuming the same product.

• Marginal utility is the principle that that limits consumption and makes it prredictable.

Assessment

1. Law that explains the satisfaction attained when a person copies the things used by other persons.________

2. It states that the when the income is low, a greater amount is spent for food; as the income goes high, lesser amount is spent for food.______

3. Money received in exchange for producing goods and services._____4. Buying and using of products the comprehend one another which gives satisfaction to consumers________5. The act of producing goods and services to satisfy human needs and want.

Identify the type of consumption

1. A student bought a meal in the canteen.2. Babes and friends drink alcoholic beverages.3. Lita bought flour to bake a cake for her

birthday.4. The water was dripping from the faucet was

observed in the Cruz’ household 5. I was thirsty so I bought mango juice.

Muchas Gracias!!!!!!