consumption pattern and expenditure

Chapter 6Chapter 6

Consumption Pattern Consumption Pattern and Expenditureand Expenditure

Consumption PatternConsumption Pattern

Consumption means the goods (commodities) , their uses, Consumption means the goods (commodities) , their uses, and services consumed eg. Food, clothing, child careand services consumed eg. Food, clothing, child care

Consumption includes Consumption includes having available, as well as using free goods of nature having available, as well as using free goods of nature

and public goods that are utilized without charge andand public goods that are utilized without charge and self-service and mutual serviceself-service and mutual service in addition to purchased goods (commodities) and in addition to purchased goods (commodities) and

services andservices and the use of semi-durable and durable goods owned or the use of semi-durable and durable goods owned or

rentedrented

Consumption Pattern (cont.)Consumption Pattern (cont.) Consumption can be studied in terms of relationships among Consumption can be studied in terms of relationships among

consumption categories – consumption patternconsumption categories – consumption pattern Consumption pattern is the way elements of consumption are Consumption pattern is the way elements of consumption are

combined to form level of consumption as a wholecombined to form level of consumption as a whole Three ways to describe level of consumptionThree ways to describe level of consumption

i)i) By the kinds and amounts of goods & services consumed in the By the kinds and amounts of goods & services consumed in the household eg how many kilos of butter, pairs of shoeshousehold eg how many kilos of butter, pairs of shoes

ii)ii) By the way these good are organised for use – the tendency for By the way these good are organised for use – the tendency for products to be chosen in clusters, with choice of one product products to be chosen in clusters, with choice of one product leading to choice of others of the same style & the activities leading to choice of others of the same style & the activities associated with product use eg. variety of sports productsassociated with product use eg. variety of sports products

iii)iii) By the values that underlie the choices of a household eg. safety, By the values that underlie the choices of a household eg. safety, cheap, comfortablecheap, comfortable

Consumption Pattern (cont.)Consumption Pattern (cont.)Categories of consumption pattern in Household Expenditure

Survey (HES) Food Beverages and tobacco Clothing and footwear Gross rent, fuel and power Furniture, furnishing, and household equipment and operation Medical care & health expenses Transport and communication Recreation, entertainment , education & cultural services Miscellaneous goods & services

Expenditure on food away from home, expenditure on beverages away from home, others

Consumption Pattern (cont.)Consumption Pattern (cont.)Constraint on consumptionConstraint on consumption

1.1. Price or cost of goods & servicesPrice or cost of goods & services High price or cost limited the purchase of goods and High price or cost limited the purchase of goods and

servicesservices

2.2. Amount of resources (esp money income, wealth, Amount of resources (esp money income, wealth, family’s own labor) available to the family for use in family’s own labor) available to the family for use in acquiring household goodsacquiring household goods

Price is the quantity of resource needed to acquire a Price is the quantity of resource needed to acquire a unit of commodity. Thus, resources also influence unit of commodity. Thus, resources also influence consumption in combination with price consumption in combination with price

3.3. Characteristics of the environment or choice situationCharacteristics of the environment or choice situation Environmental‘s constraint on consumption choices is Environmental‘s constraint on consumption choices is

the availability of market goods & servicesthe availability of market goods & services

Consumption Pattern & Consumption Pattern & ExpenditureExpenditure

Consumption expenditure covers Consumption expenditure covers

1.1. All money spent by household members on goods and All money spent by household members on goods and services meant for consumption and also services meant for consumption and also

2.2. Value of goods and services received in kind. Thus, Value of goods and services received in kind. Thus, included also free or concessional goods and services included also free or concessional goods and services (eg free housing), the value of home-produce consumed(eg free housing), the value of home-produce consumed

Consumption Pattern & Consumption Pattern & Expenditure (cont.)Expenditure (cont.)

Current need and future needCurrent need and future need

Basic needBasic need Food, clothing, shelterFood, clothing, shelter Careful evaluation on the expenditure on this needs Careful evaluation on the expenditure on this needs

may result in savingsmay result in savings The expenditure on basic needs are throughout the life-The expenditure on basic needs are throughout the life-

cycle as those are needed to survivecycle as those are needed to survive These are the current need and also the future need that These are the current need and also the future need that

must always be fulfilled must always be fulfilled


Non-basic needNon-basic need Is the current need only, or future need only or can be Is the current need only, or future need only or can be

bothboth Transportation, education, insuranceTransportation, education, insurance Transportation is used throughout our life-cycle – to Transportation is used throughout our life-cycle – to

move form one place to another either going to work, move form one place to another either going to work, doing family activities or comunity activitiesdoing family activities or comunity activities


In spending, have to In spending, have to Know the need towards certain itemKnow the need towards certain item Choose suitable item according to needChoose suitable item according to need Make wise decision on purchasing - survey the price, Make wise decision on purchasing - survey the price,

quality, time to buy, method of payment either by cash or quality, time to buy, method of payment either by cash or creditcredit

After purchasing – know how to maintain the item, as this After purchasing – know how to maintain the item, as this could help to reduce cost of repairing & thus it would last could help to reduce cost of repairing & thus it would last longerlonger

ExpenditureExpenditure

Housing NeedHousing Need Home ownership – main goal & involve high cost, Home ownership – main goal & involve high cost,

consider your wants and abilityconsider your wants and ability Prepare for the downpayment needed & estimate the cost Prepare for the downpayment needed & estimate the cost

or price - may need 10% or 15% of the total cost as the or price - may need 10% or 15% of the total cost as the downpaymentdownpayment

Estimate other costs – legal fees, transfer title, stamp dutyEstimate other costs – legal fees, transfer title, stamp duty For a good decision on shelter or housing, need more For a good decision on shelter or housing, need more

time to consider the choices on housing, think about the time to consider the choices on housing, think about the advantages and disadvantagesadvantages and disadvantages

ExpenditureExpenditure The location of the house or the environment – look for The location of the house or the environment – look for

comfortcomfort When to buy or build the house When to buy or build the house Type of house – condominium, apartment, double-storey, Type of house – condominium, apartment, double-storey,

semi-detached, bungalow – depends on the type of work, semi-detached, bungalow – depends on the type of work, life-style, income, family size and agelife-style, income, family size and age

Status of the house – freehold or lease-typeStatus of the house – freehold or lease-type Consider your wants – what criteria or characteristic of Consider your wants – what criteria or characteristic of

the house are important to you eg spacious living room, the house are important to you eg spacious living room, have a family hall, single storeyhave a family hall, single storey

Affordable price or costAffordable price or cost Choice of home loan Choice of home loan

Expenditure (cont.)Expenditure (cont.) Type of ownership – rent or own a house (buy or build the Type of ownership – rent or own a house (buy or build the

house)house) When to rent?When to rent?

Rent when the period of staying in a certain place is Rent when the period of staying in a certain place is short or in the early time of working or when you are short or in the early time of working or when you are single, or frequently changing jobsingle, or frequently changing job

Advantages of renting:Advantages of renting: Less cost compared to paying for downpayment or other Less cost compared to paying for downpayment or other

cost as in buying a housecost as in buying a house Less cost & less time used in managing the house – no Less cost & less time used in managing the house – no

repair cost or maintenance cost repair cost or maintenance cost

Expenditure (cont.)Expenditure (cont.)

Disadvantages of renting:Disadvantages of renting: The rental payment is an expense and not an The rental payment is an expense and not an

investment or savingsinvestment or savings Rental may increase due to inflationRental may increase due to inflation Unable to make any renovation as you pleasedUnable to make any renovation as you pleased


Own a house – buy or build the houseOwn a house – buy or build the house

Advantages:Advantages: Feel secured having a permanent shelter, feel proud of Feel secured having a permanent shelter, feel proud of

owning a house, more responsible in maintaining the owning a house, more responsible in maintaining the househouse

A fixed monthly payment or expenses, not fluctuating A fixed monthly payment or expenses, not fluctuating or increasingor increasing

As the installment ends, the house is yoursAs the installment ends, the house is yours In a long-term, better to own a house than renting one In a long-term, better to own a house than renting one


Disadvantages of owning a house:Disadvantages of owning a house: Buying a house need a large amount of downpayment Buying a house need a large amount of downpayment

involving large amount of cashinvolving large amount of cash If the purchasing is made too early, the cash savings is If the purchasing is made too early, the cash savings is

used up and reduces the emergency fundused up and reduces the emergency fund Owning a house in a short period of time is expensive Owning a house in a short period of time is expensive

compared to a long-term as paying for costs such as compared to a long-term as paying for costs such as legal fees, stamping duty, fees for transferring title etc legal fees, stamping duty, fees for transferring title etc may be larger than the appreciate value of the housemay be larger than the appreciate value of the house


Transportation NeedTransportation Need Cost to own a car to buy certain type of carCost to own a car to buy certain type of car Repair and maintenance or service costsRepair and maintenance or service costs Type of car according to your preferenceType of car according to your preference Duration of owning a certain car - to reduce the repair Duration of owning a certain car - to reduce the repair

cost own for a shorter period of time. Old cars might cost own for a shorter period of time. Old cars might incur higher costincur higher cost

Better to a brand new car compared to a use car as Better to a brand new car compared to a use car as maintenance cost is higher maintenance cost is higher


Clothing NeedClothing Need Protection from weather, a psychological protection Protection from weather, a psychological protection

from social pressure, for comfort, esthetical valuefrom social pressure, for comfort, esthetical value clothing need differs according to age, interest, clothing need differs according to age, interest,

values, status, amount of money availablevalues, status, amount of money available Suitable clothing helps in physical and cognitive Suitable clothing helps in physical and cognitive

developmentdevelopment Consider whether a certain type of clothing is needed, Consider whether a certain type of clothing is needed,

function as a clothing, its uses, the amount of clothes, function as a clothing, its uses, the amount of clothes, price, cost, buy or do-it-yourselfprice, cost, buy or do-it-yourself

Expenditure (cont.)Expenditure (cont.)Other NeedOther Need

EducationEducation Higher education level, better financial resourcesHigher education level, better financial resources Important in fulfilling various needs and wants apart Important in fulfilling various needs and wants apart

from comfort and securityfrom comfort and security Higher cost in pursuing higher level of educationHigher cost in pursuing higher level of education

InsuranceInsurance Type of insurance suitable for certain individualType of insurance suitable for certain individual How many life insurance policies to buy? For all family How many life insurance policies to buy? For all family

members?members? Differences in insurance policies Differences in insurance policies

Money and ChildrenMoney and Children Children’s physiological needs must be fulfilledChildren’s physiological needs must be fulfilled Expenses depending on number of children and their ageExpenses depending on number of children and their age Education cost depends on number of childrenEducation cost depends on number of children Education costs – from kindergarten, tuition classes, Education costs – from kindergarten, tuition classes,

primary and secondary school – private or public schoolsprimary and secondary school – private or public schools Expenses for nurseries or baby-care centre or maidsExpenses for nurseries or baby-care centre or maids Children wants are unlimited, thus parents play important Children wants are unlimited, thus parents play important

role in limiting the cost on children as the children are role in limiting the cost on children as the children are immature in evaluating their wantsimmature in evaluating their wants

Money and Children (cont.)Money and Children (cont.)

Parents should not be spending according to the their Parents should not be spending according to the their children wants to show their love and caring. Children children wants to show their love and caring. Children should guide them in their wants that relates to moneyshould guide them in their wants that relates to money

The use of money by children is determined by The use of money by children is determined by parents. Parents should explain why certain wants will parents. Parents should explain why certain wants will not be fulfilled at certain times. It may be fulfilled at not be fulfilled at certain times. It may be fulfilled at some other time or cannot be fulfilled at any time. This some other time or cannot be fulfilled at any time. This will avoid wastage & at the same time preserve the will avoid wastage & at the same time preserve the good relationship among family members good relationship among family members

Money and Children Money and Children (cont.)(cont.)

Should know at what age children learn the value of Should know at what age children learn the value of money. The more exposed to the use of money, the faster money. The more exposed to the use of money, the faster they learn the value of moneythey learn the value of money

Children can be taught to understand the value of money Children can be taught to understand the value of money at an early age to avoid wastage as they are easily at an early age to avoid wastage as they are easily influenced by others either by the use of the same item by influenced by others either by the use of the same item by others or through advertisements others or through advertisements

consumption pattern and expenditure

Business

consumption price

consumption choices

child care consumption

way elements of consumption

level of consumption

goods commodities

current need

durable goods