Consumption is the spending on consumer goods and services over a given period of time.
Total consumption is one way to measure the performance of an economy as consumers tend to spend more money when the economic climate is good and confidence is high. Strong levels of consumption in the economy usually means that businesses are experiencing high demand for their products which will increase their profit levels.
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Key terms:
Income – the money which is received by an individual or business for their work or the sale of a good or service.
Disposable income – an individual’s income minus direct taxes. It is the money which is available for them to spend.
Saving – the proportion of disposable income which is not spent by individuals over a period of time.