When studying the main components of consumer consumption or spending, the first fact to understand is that they tend to change. Basically, GDP or gross domestic product is a final number of all the services and products manufactured domestically within one year, minus a trade deficit. It’s easy to interpret it as the sum of the total spending of key components, and there are different parts involved, including consumer spending with all of its elements.
Before getting a better insight of consumer spending and its basic components, people should be aware of the meaning of a consumer’s buyer behavior, which is normally influences by a few major factors, including personal, psychological, social, and cultural. They all have a great impact on the buying and spending decisions made by consumers so that they shouldn’t be overlooked when mastering this subject.
In general, consumer spending is also the largest part of gross domestic product, and it’s always determined by a few important components. It’s all about the total sum of consumer spending on the so-called durable goods (products that can be stored and come with their average service life of 3 years), non-durable goods (storable products with a service life less than 3 years), and service spending (goods that can’t be stored and should be consumers at the time of their purchase).
When evaluating changes in these important consumer spending components, the most obvious fact is that people’s consumption increased considerably, but its proportions didn’t move correspondingly for different reasons. In terms of non-durable products, this component suffered a great loss in its share, while durable goods remained the same, while service spending managed to increase more than twice. The underlying reasons for such relative changes should be considered to make final conclusions about the components of consumer spending.
In the near past, durable goods spending changed the least among other parts, and this fact is not surprising if to make a valid assumption that people’s demand for durable products tends to be less elastic compared to other consumer spending components. For instance, rational consumers don’t buy such goods as washing machines more often than once in every 6 years, even if their income increase or prices fall. Another explanation is that the production of durable goods changed considerably too.
When studying the main components of consumer consumption or spending, the first fact to understand is that they tend to change. Basically, GDP or gross domestic product is a final number of all the services and products manufactured domestically within one year, minus a trade deficit.