Definition
- Consumption
- Consumption is spending by households on goods and services for their own use, and it is the largest component of aggregate demand.
Example
Can you think of an example of consumption?
A family in Leeds buys groceries, pays for haircuts and books a week in Devon. All of it is consumption. Because it is by far the largest part of AD, a small percentage change in it moves AD a long way.
Test yourself
Can you name the four components of aggregate demand?