Concept of Consumption and Saving - 984 Words

THE CONCEPT OF CONSUMPTION AND SAVING. Consumption and savings are opposite by nature. The term consumption denotes expenditure and by savings we understand the act of preserving money for the future needs. Most of us are in the habit of meeting the present needs from our income. After that, if there remains anything, then only savings can be done. But in the long run, it is the savings that matters most. CONCEPT OF SAVING The concept of saving is important in the context of economics and finance. In general application, saving usually stands for depositing money separately for a particular purpose, for instance investment in retirement plan or depositing cash in the bank. In other words, savings means the reducing of expenditure†¦show more content†¦Moreover, consumption can also be measured in a variety of different metrics such as energy and energy in economics. John Maynard Keynes developed a function, known as the consumption function. This function is a mathematical function which is used to calculate the total consumer spending in an economy. John Maynard Keynes’s theory merely expresses consumption as a function of the aggregate disposable income. Basically this metric essentially defines consumption as the part of income that is disposable and does not go into saving. But disposable income in turn can be defined in a number of ways – for example, to include borrowed fun ds or expenditures from savings. Traditionally, consumption was seen as rather unimportant compared to production, and the political and economic issues surrounding it. With the development of a consumer society, increasing consumer power in the market place, the growth in marketing, advertising, sophisticated consumers, ethical consumption etc, it is recognised as central to modern life. People in different position in respect to income have systematically different structures of consumption. The rich spend more for each chapter in absolute terms, but they spend a lower percentage in income for food and other basic needs. The percentage values of an aggregation over all the households in a country can thus be used for judging income distribution and the development level of the society. The rich haveShow MoreRelatedUse Of Phase Of Building A Largest Stage That Impacts Environment During The Life Cycle1583 Words   |  7 PagesUse phase of building is the largest stage that impacts environment during the life cycle, so require more attention in the field of energy saving of building. In the initial design stage of buildings, through LCA can help design decisions, such as the appropriate use of zero energy building techniques. 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