Script

Consumption economics

Module- 1 Meaning and Definitions

Consumption is a major concept in economics and is also studied by many other
social sciences. Economists are particularly interested in the relationship between
consumption and income, and therefore in economics the consumption function plays a
major role. Consumption is the only final purchase of goods and services by individuals,
while other types of expenditure like fixed investment, intermediate consumption, and
government spending are placed in separate categories. 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).

Definitions:
1. Economics:
The social science that deals with the production, distribution, and consumption of
goods and services and with the theory and management of economies or economic
systems. It is mostly relevant to financial considerations.

2. Consumption:

The process in which the substance of a thing is completely destroyed, used up,
or incorporated or transformed into something else. Consumption of goods and services is
the amount of them used in a particular time period.

1. Production:
Production is a process of combining various material inputs and immaterial inputs
(plans, know-how) in order to make something for consumption (the output). It is the act of
creating output, a good or service which has value and contributes to the utility of
individuals.
2. Family:
A fundamental social group in society typically consisting of one or two parents and
their children. Family is defined as any group of persons closely related by blood, marriage
or adoption and sharing common purse and residing under one roof.

3. Income:
The amount of money or its equivalent received during a period of time in exchange
for labor or services, from the sale of goods or property, or as profit from financial
investments.

7.Consumption Expenditure:
Expenses incurred in consumption, as opposed to expenses incurred
in production of goods and services. It is the purchase of goods and services for use by
households.

Module- 2 Family as a decision making unit of household

Consumption and Household Production:
Consumption is defined in part by comparison to production. Different schools of
economists define production and consumption differently. According to mainstream
economists, only the final purchase of goods and services by individuals constitutes
consumption, while other types of expenditure — in particular, fixed
investment, intermediate consumption, and government spending — are placed in separate
categories (See consumer choice). 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).

Household influences for marketing strategy:

The structure of the Household unit, stage of the household lifecycle, Household Decission
Process are the factors on which Household Purchase and Consumption Behaviour depend
for market strategy.
 For the market strategy it is important for marketers to know about the families and
households because to imparts lifestyle and consumption values to their members, to make
consumer decisions, to make several joint purchase decisions, prime target market for goods
and services. At each stage of the life cycle the members of the family have different needs
and services., ie the consumption pattern. As the interests change so too does the ability to
reach them and so purchasing decision changes.( Fig.1)

The critical consumption factors of the household is the number of people children
and adults in the family, the age group to which they beong and number of employed
products.for example if the family is having children then they consume more on the
children products like chips, toys etc. and where as the family is with only two people then
the consumption fron their income is less.

Module- 3 Consumer- Definition

A consumer is one who acquires goods and services for ultimate consumption or use
by a person, family, or household. Consumers go to shopping and purchase goods and
services in their efforts to accomplish their own economic goals.

Consumer is a person who buys goods or services to be used or consumed by

himself/herself or by someone else on behalf of the buyer. Goods may include both
consumable items or durable consumer goods. While services paid for may be transport,
electricity, film-shows and the like.

A ‘consumer’ may also be defined as “any body who chooses goods and services,
spends money to obtain them and uses them to satisfy his or her own needs”.

Good:
Products that are purchased for consumption by the average consumer. Alternatively
called final goods, consumer goods are the end result of production and manufacturing and
are what a consumer will see on the store shelf. Clothing, food, automobiles and jewelry are
all examples of consumer goods.. Goods are items that can be seen and touched, such as
books, pens, salt, shoes, hats, and folders.
Service:
Services are intangible. Services are provided by other people, such as doctors, lawn
care workers, dentists, barbers and waiters. Service of any descripition, which is made
available to potential users and includes the provision of facilities, does not include the
rendering of any service frre of charge or under a contract of sale.

Module- 4 Consumerism, Rights and Responsibilities of Consumers- safety, choose,

heard, informed, redress, healthy environment.
Consumerism:
Consumerism is a social and economic order and ideology that encourages the
acquisition of goods and services in ever-greater amounts. The term "consumerism" has
been derived from two words namely- “Consumer”- the user or customer and “ism”-
movement. The other name of consumerism is consumer movement. It is an organized and
collective movement of consumers.

Consumerism refers to a movement by consumers to ensure fair and honest (ethical)

practices on the part of manufacturers, traders, dealers and services providers in relation to
consumers. The movement may be regarded an attempt by individual consumer activists
and consumer associations for creating consumer awareness about the malpractices in the
market and finding ways and means to protect their interests.

The main objective of the consumer movement is to educate and unite consumers and to
fight for the protection of their rights. It is similar to trade unions because it is a collective
approach to solve the malpractices and injustice done by any organization. In this sense it is
a movement or a set of policies aimed at regulating the products, services, methods, and
standards of manufacturers, sellers, and advertisers in the interests of the buyer.

Consumer Rights and Responsibilities:

A right is an entitlement to something or to be treated in some particular way. Rights
of consumers are important because they empower people to protect themselves in the
economic marketplace.
CONSUMER RIGHTS:

1. The right to safety

Consumers have a right to be protected against marketing of goods which
are injurious to health and life. As a consumer if you are conscious of this right, you
can take precautions to prevent the injury or if injury is caused in spite of precaution,
you have a right to complain against the dealer and even claim compensation. For
example, if you buy any medicine, the pharmacy selling it can be held responsible if
the medicine proves harmful. Again if gas cylinder is used for cooking, you have to
check that it does not leak when it is supplied to you. If it starts leaking afterwards,
the supplier will be liable to pay compensation if the leakage of gas leads to fire and
causes injury or death to anyone.
( Fig.2)

2. The right to be informed

Consumers also have the right to be informed about the quantity, quality, purity,
standard or grade and price of the goods available so that they can make proper choice
before buying any product or service. Information to consumers such as product
specification, place of origin, safety warnings, price, mode of payment, date of quality
assurance, description of after-sale services, warranty, ingredient, nutritional facts, etc.Also,
where necessary, the consumer must be informed about the safety precautions to be taken
while using the product to avoid loss or injury. Taking the example of gas cylinder again,
the supplier must inform the user to stop the flow of gas with the help of the regulator when
it is not in use.

By which consumers have to be given facts needed to make an informed choice, and
to be protected against dishonest or misleading advertising or labeling.

3. The right to choose

Every consumer has the right to choose the goods needed from a wide variety of
similar goods offered at competitive prices with an assurance of satisfactory quality..
Very often dealers and traders try to use pressure tactics to sell goods of poor quality.
 Sometimes, consumers are also carried away by advertisements on the TV. These
possibilities can be avoided if consumers are conscious of this right.( Fig.4)

4. The right to be heard

This right has three interpretations. Broadly speaking, this right means that
consumers have a right to be consulted by Government and public bodies when
decisions and policies are made affecting consumer interests. Also, consumers have a
right to be heard by manufactures, dealers and advertisers about their opinion on
production and marketing decisions. Thirdly, consumers have the right to be heard in
legal proceedings in law courts dealing with consumer complaints ( Fig.5)

5. The right to redress

If and when any consumer has a complaint or grievance due to unfair trade practices
like charging higher price, selling of poor quality or unsafe products, lack of regularity in
supply of services etc. or if he has suffered loss or injury due to defective or adulterated
products, he has the right to seek remedies. He has a right to get the defective goods
replaced or money refunded by the seller or dealer. He also has the right to seek legal
remedies in the appropriate courts of law. Through this right the consumers are assured that
their complaints will receive due attention. This right also provides for due compensation to
consumers if they have suffered a loss or are put to inconvenience due to the fault of the
supplier or manufacturer. By which consumers have to receive a fair settlement of just
claims, including compensation for misrepresentation, shoddy goods or unsatisfactory
services.( Fig.6)

6. The right to consumer education

By which consumers have to acquire knowledge and skills needed to make informed,
confident choices about goods and services while being aware of basic consumer rights and
responsibilities and how to act on them. : To prevent market malpractices and exploitation
of consumers, consumer awareness and education are essentially required. For this purpose,
consumer associations, educational institutions and Government policy makers are expected
to enable consumers to be informed and educated (Fig.7)
 6. The right to satisfaction of basic needs

By which consumers have to be given access to basic essential goods and services,
adequate food, clothing, shelter, health care, education and sanitation. (Fig.8)

4. The right to a healthy environment

By which consumers have to live and work in an environment which is non-

threatening to the well-being of present and future generations.( Fig.9)

Consumer Responsibilities:
In conjunction with the above rights, there is also an expectation that consumers act
rationally, and accept a reasonable level of responsibility when exercising choice and
entering into transactions in the market place. Consumer responsibilities refer to the
responsibility of having awareness of the quality and safety of goods and services while
purchasing and the responsibility to collect information available about a product or service
and to update oneself with changes or innovations taking place in the market.
Responsibilities always precede rights. If consumers want their rights recognised, they must
first exercise their responsibilities. (Fig.10)

Some of the responsibilities as consumers are:

1. Critical awareness:
The responsibility to be more alert and questioning about the use of product; the
price, quality of goods and services we use. Consumer should not be tempted by clever and
misleading advertisements. The products should be examined and offer for the service.(
Fig.11)

2. Action:
The responsibility to assert and act to ensure that we get a fair deal, as long as we remain
passive consumers, we will continue to be exploited. Consumer should raise their voice and
protect against any form of exploitation.

3. Social Concern:
The responsibility to be aware of the impact of our consumption on other citizens,
especially disadvantaged or powerless groups, whether in the local, national or international
community.
 4. Environmental Awareness:
The responsibility to understand the environmental consequences of our consumption.
Consumers should recognize our individual and social responsibility to conserve
natural resources and protect the earth for future generations

5. Solidarity:
The responsibility to organize together as consumers to develop the strength and influence
to promote and protect our interest. Getting consumer protection measures through
networking and campaign and advocacy programmes on various consumer issues.

While purchasing any good or service consumers must exercise the following
responsibilities
1. BEFORE BUYING (Fig.15)

·Planning in advance
·Enquiring past performance of product / service
·Enquiring about reputation and past performance of producer / seller / service provider
2. WHILE BUYING (Fig.15)

·Asking for demonstration regarding how to operate / use the product/service

·Enquiring about after-sales service and ensuring availability, phone number, address and
e.mail of service center
·Reading and knowing the contents of guarantee / warranty card
·Insisting for approved sale bill with serial number, address, phone number, etc.
·Obtaining guarantee / warranty card and getting it signed/sealed by dealer
3. AFTER BUYING
·Using products as per instruction given in user manual
·Keeping bills and guarantee card safely
·In case of fault inform dealer and service center. Do not meddle or repair yourself
·Keeping record for all correspondences
·Seek immediate redressal of deficiency in product