Economics Part B

Table of Contents


Understanding Consumption

Consumption includes all the goods and services (apart from residential buildings) which households purchase or receive as services from the state. The purchase of residential buildings is regarded as an investment and not as consumption. Consumption is usually divided into tow groups:

  1. Private consumption – the purchase of goods and services from the private sector.

  2. Public consumption – purchase and/or receipt of goods (or services) from various government agencies.

The value of consumption is calculated as follows:

  1. Goods bought – according to the value of the purchase.

  2. Goods and services received from the state – according to the total expenditure incurred by the state in producing them. It is usual to regard goods purchased from commercial companies owned by the state, such as the Electricity Corporation or Mekorot (which sells water), as goods purchased in the private sector.