What is Consumption?

Definition: Consumption, in economics, is the way that consumers and markets exchange, use, and destroy goods and services.

What Does Consumption Mean?

What is the definition of consumption? Consumption is the vital foundation for economics, as well as the broader economy. Our whole system of reward and progress is based on consuming and producing ever more goods and services. Throughout the economy, consumers decide which products to consumer based on the price of the good, the availability of the good, and their own needs and wants. There are many industries, such as advertising and marketing that are solely devoted to figuring out how to get more consumers to consume their product. Economics sees consumption as the bedrock of our economic activity, and is necessary for our lives.

Let’s look at an example.


Michelle is a frequent shopper at her local grocery store, SafeMart, and every week needs to decide what she wants for herself, and which product will provide that. Of course, she does her research and looks at all of the products, but by and large, price drives the way she, and other consumers, interact with the market.

This week, she is thinking of cooking a new pasta dish, which requires pasta, tomato sauce, and a variety of vegetables. She first looks at all the varieties of pasta, but one thing stands out: price. One brand costs $2.00 per pound, and the other costs $1.99 per pound. With the same quality and amount, she chooses the less expensive option. This pattern repeats itself for tomato sauce ($1.00 per pound vs. $0.85), zucchini ($1.50 per pound vs. $1.25), and squash ($1.45 per pound vs. $1.30). The main way that Michelle and many others interact with the market is on the basis of price and their needs.

Grocery stores recognize this emphasis on price, and frequently provide coupons, specials, and an assortment of advantages to being loyal and purchasing ever less expensive arrays of goods. Price is the main motivator of how consumers interact with all aspects of the market, including businesses.

Summary Definition

Define Consumption: Consuming means to use up a good or service.

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