Page 45 - Macroeconomics. book docx_Neat
P. 45
4.4 Consumption Spending (C)
Consumption refers to spending by households on goods and services to satisfy their
daily needs and wants.
Examples include food, clothing, transportation, education, healthcare, and housing
services.
Consumption is usually the largest component of aggregate spending in most
economies.
Consumption and Income
Consumption is closely related to income. When income increases, consumption usually
increases. When income decreases, consumption decreases but often at a slower rate.
This means that consumption is relatively stable compared to other components of
spending.
Types of Consumption
Consumption can be divided into:
Necessary consumption, such as food and basic housing
Luxury consumption, such as expensive goods and travel
45
