Meaning of Consumption and Classification of Wants

Consumption, in economics, means the direct use of goods and services to satisfy human wants — eating a meal, wearing a shirt, or riding a bus are all acts of consumption. Every act of consumption begins with a want, and economics classifies wants by how essential they are to the person feeling them.

Necessaries are goods without which a person cannot live or work efficiently — food, basic clothing and shelter. Economists further split these into necessaries for existence (the bare minimum needed to stay alive) and necessaries for efficiency (a somewhat higher standard needed to work productively — for instance, nutritious food rather than merely enough food to survive). Comforts are goods that go beyond bare necessity to make life easier or more convenient without being extravagant — a ceiling fan, a bicycle, a wristwatch. Luxuries are goods consumed mainly for prestige, display, or pure pleasure, whose absence does not reduce a person's efficiency at all — for example, an imported car or expensive jewellery.

This classification is relative, not absolute: a refrigerator was a luxury for most Indian households a few decades ago and is a comfort, even close to a necessity, today; a good bought by a high-income household as a comfort may be a luxury for a low-income household. As living standards rise over time and across income groups, goods steadily migrate down this ladder from luxury to comfort to necessity.

Wants also share three general features that matter for the theory that follows: (a) many wants exist and press for satisfaction at the same time (multiplicity of wants); (b) a single want can usually be satisfied by more than one good (competitiveness of wants — tea or coffee can both satisfy the want for a hot beverage); and (c) most wants are satiable — the more a want is satisfied, the weaker it becomes. This third feature, satiability, is exactly what the theory of utility in the next section is built to explain.