Microeconomics Final Project 1u6b5j

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CONSUMPTION PATTERNS OF DIFFERENT AGE GROUPS IS DIFFERENT. Consumption refers to expenditures by households (consumers) on final goods and services.

Introduction Keynesian Theory of consumption The Keynesian Theory of consumption is that current real disposable income is the most important determinant of consumption in the short run. Real Income is money income adjusted for inflation. It is a measure of the quantity of goods and services that consumers have buy with their income (or budget). For example, a 10% rise in money income may be matched by a 10% rise in inflation. This means that real income (the quantity or volume of goods and services that can be bought) has remained constant.

The chart above shows how real disposable incomes and consumer spending have grown in recent years. This increase in real incomes has been a factor behind the yearly growth of consumer demand in each of the last nine years.

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The Keynesian Consumption Function

Disposable Income (Yd) = Gross Income - (Deductions from Direct Taxation + Benefits) The standard Keynesian consumption function is as follows: C = a + c Yd where, C= Consumer expenditure a = autonomous consumption. This is the level of consumption that would take place even if income was zero. If an individual's income fell to zero some of his existing spending could be sustained by using savings. This is known as dis-saving. c = marginal propensity to consume (mpc). This is the change in consumption divided by the change in income. Simply, it is the percentage of each additional pound earned that will be spent. There is a positive relationship between disposable income (Yd) and consumer spending (Ct). The gradient of the consumption curve gives the marginal propensity to consume. As income rises, so does total consumer demand. A change in the marginal propensity to consume causes a pivotal change in the consumption function. In this case the marginal propensity to consume has fallen leading to a fall in consumption at each level of income. This is shown below:

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Key Consumption Definitions Average propensity to consume = Total consumption divided by total income Average propensity to Save = Total savings divided by total income (also known as the Saving Ratio

A Shift in the Consumption Function

The consumption - income relationship changes when other factors than income change - for example a rise in interest rates or a fall in consumer confidence might lead to a fall in consumption spending at each level of income. A rise in household wealth or a rise in consumer's expectations might lead to an increased level of consumer demand at each income level (an upward shift in the consumption curve).

REFERNCES:

http://library.thinkquest.org/C004830/female.htm http://www.ces.ed.ac.uk/PDF%20Files/Brief011.pdf

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DETAIL EXPLAINATION. Consumption patterns one of the most important drivers of development patterns in the industrialized world and will serve as case for the study of scenarios and transition management in Belgium. What will be addressed here is less households’ consumption of a specific commodity or service such as transportation or food, than the structure, function and meaning of the consumption patterns that characterize the different lifestyles that coexist in our affluent, liberal, democratic and capitalist societies. While the concept of “consumption pattern” is omnipresent in sustainable development literature since its appearance in Agenda 21, it is generally left undefined as if it is not necessary to be more explicit about it. Here we will define a consumption pattern as that aspect of a lifestyle (or livelihood) that relates to the nature and amount of the different goods and service that the households consider as adequate for fulfilling their needs. Briefly stated, if a lifestyle can be defined as the manner of living that reflect a household’s values and attitudes, a consumption pattern is the relation to goods and services that characterize that lifestyle.

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CONSUMPTION OF GOOD AS A FUNCTION OF OUR CULTURE: .The production, processing, and consumption, of commodities requires the extraction and use of natural resources (wood, ore, fossil fuels, and water); it requires the creation of factories and factory complexes whose operation creates toxic byproducts, while the use of commodities themselves (e.g. automobiles) creates pollutants and waste. Yet of the three factors environmentalists often point to as responsible for environmental pollution — population, technology, and consumption — consumption seems to get the least attention. One reason, no doubt, is that it may be the most difficult to change; our consumption patterns are so much a part of our lives that to change them would require a massive cultural overhaul, not to mention severe economic dislocation. A drop in demand for products, as economists note, brings on economic recession or even depression, along with massive unemployment.

RESEARCHES BASED ON CONSUMPTION PATTERN: Several researches have been conducted on the study of consumption patterns out of which one is given below.

MAX-NEEF’S (1991) NEED-SATISFIERS THEORY: We will use Max-Neef’s (1991) need-satisfiers theory as the foundations of a framework for analyzing lifestyles and household’s consumption patterns. Max-Neef defines nine fundamental universal needs amongst which he finds no permanent, fixed hierarchy. These are: subsistence, protection, affection, understanding, participation, idleness, creation, identity and freedom. They are more or less adequately fulfilled by satisfiers, which can vary from place to place and time to time. In Max-Neef’s theory, satisfiers belong to different existential categories: being, having, doing and interacting. They can be more or less specialized (addressing only one need at a time) or synergetic (addressing several needs at a time). They can also be pseudo-satisfiers, inhibiting satisfiers or plain destroyers.  Relationships between needs and consumption clusters (housing, clothing, food, culture, communication, entertainment, etc.): what needs are at stake in each of them?  Relationships between consumption clusters and satisfiers: what kind of satisfiers (marketable or not, individual or collective, etc.) is privileged for which need, which clusters?

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 Relationships between satisfiers and consumption clusters. As a first test for the “needs-satisfiers attributes” framework, we will see if it can for the changes in lifestyles and consumption patterns in societies and history. The main historical and anthropological s of the diversity and evolution of consumption patterns (Campbell 1987, Douglas and Isherwood 1979, Fine, B. and E. Leopold 1993, Wilkinson 1973, etc.) will be reviewed in an attempt to reformulate them in our “Needs-Satisfiers Attributes” matrix. If we succeed in doing so, we will be more confident in the fruitfulness of the framework for deg scenarios for the future.

FOOD CONSUMPTIN PATTERN: Economic development is normally accompanied by improvements in a country’s food supply and the gradual elimination of dietary deficiencies, thus improving the overall nutritional status of the country’s population. Furthermore, it also brings about qualitative changes in the production, processing, distribution and marketing of food. Increasing urbanization will also have consequences for the dietary patterns and lifestyles of individuals, not all of which are positive. Changes in diets, patterns of work and leisure - often referred to as the “nutrition transition” - are already contributing to the causal factors underlying non communicable diseases even in the poorest countries. Moreover, the pace of these changes seems to be accelerating, especially in the low-income and middle-income countries. The countries with the maximum food intake i.e. 3,500 calories per person are United States of America, Portugal, , Turkey etc. Canada, Mexico, Argentina, Australia, Kazakhstan etc have an annual intake of 3,000 to 3,500 calories per person. The countries with the minimum food intake are Afghanistan, Mongolia, Chad, Ethiopia, Angola etc. Many factors govern the pattern of food-intake. In countries, where maximum population falls into the below poverty line (BPL) category, the per capita food intake is also less. The developed countries enjoy a higher standard of living. So there, the average food intake per person is high. With a population of about 6 billion, food consumption has become a fast rising concern. As to statistics by World Bank, population in the world is growing by more than 200,000 people a day and that has an impact on world food consumption. “Food consumption can be defined as the amount of food available for human consumption. Sometimes the actual food consumption is lower than to quantity of food available depending upon wastage and losses of food during the process of storage, cooking etc. The per capita food consumption over the world simply means the total food consumption divided by total population.

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Alcohol: As millions of baby boomers enter retirement age, it is important to understand their needs for healthcare. Alcohol consumption is one area that requires attention. Understanding the factors that impact drinking in older adults helps aid in alcohol abuse prevention and education efforts. A recent study looked at the alcohol-consumption trajectories and associated characteristics that impact adults over the age of 50. Alyssa Platt, Frank A. Sloan and Philip Costanzo examined the factors that must be studied in older adults to understand their drinking trajectories. The objective of the study was to look at the changes in drinking choices of older adults over the age of 50. It also determined to examine baseline personal characteristics and subsequent life events that were associated with different alcohol-consumption trajectories during a follow-up period lasting 14 years. The researchers gathered data from the Health and Retirement Study, which included participants aged from 51 to 61 years in 1992. It only included the individuals who had survived the sample period of 1992 to 2006. Each had a minimum of five interviews about alcohol consumption. There was a total of 6,787 participants, and of those participants, 3,760 were women. The researchers used linear regression to develop drinking trajectories over 1992 to 2006. The results were used to group the participants into one of five drinking categories. The researchers then analyzed the relationship between personal demographic, income, health and attitudinal characteristics in addition to life events and drinking-trajectory category. The results of the study showed that overall alcohol consumption declined among adults over 50. The rate of decline, however, was different among the participants, and for a few participants alcohol consumption actually increased. The participants who showed an increased consumption of alcohol were more likely to be affluent, highly educated, male, White, unmarried, less religious and in good health. Also, participants who were shown to have had a history of problem drinking were found to show an increase in alcohol consumption.

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