5. 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
6. 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
7. 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
8. 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
9. Types of Consumption
3. Wasteful
Buying 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
10. 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.
11. 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.
12. 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.
13. Factors That Influence Our
Consumption
3. Advertisements
Advertisement is a way of motivating and
convincing consumers to patronize certain
products.
14. 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
15. Factors That Influence Our
Consumption
4. Prices
this 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
16. 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.
17. Factors That Influence Our
Consumption
6. Seasons
it affects our consumption since some
things are bought depending on the weather.
E.G.: we buy umbrella and jacket during rainy
seasons.
18. Factors That Influence Our
Consumption
7. Imitation/Bandwagon Effect
as 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.
19. LAWS ON CONSUMPTION
1. Law of Variety
According 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.
20. 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.
21. 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.
22. 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.
23. LAWS ON CONSUMPTION
5. Law of Diminishing Marginal Utility
Utility refers to the satisfaction achieved in
consuming goods and services.
24. • 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.
25. 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.
26. • Marginal utility is the principle that that limits
consumption and makes it prredictable.
27. 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.______
28. 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.
29. 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.
