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Economic Implications of Human Wants
Consumption is a branch of economics, which deals with the satisfaction of human wants. The existence of human wants is the starting point of all economic activity in the world. When a want is satisfied, the process is known as consumption. In plain language, consumption means usage. Thus, we speak of the consumption of food. But in economics we can speak of the consumption of the services of lawyer or a doctor. The point we have to note here is that consumption applies both to commodities and services.
Consumption is a study about the theory of wants. Under consumption, we study about the nature of wants, the classification of wants, the laws relating to consumption such as the Law of diminishing Utility, Engel’s Law of Family Expenditure and the Law of Demand and so on.
Some goods are consumed in order to produce other goods. Such goods are known as production goods. Thus, for example, cotton used in making cloth may be considered as a production good. Some goods satisfy ‘final’ wants. They are known as consumption goods. Examples of the latter category are food, clothing and services directly rendered by certain categories of labor such as doctors and actors.
The early economists emphasized only the production of wealth. They considered economics mainly as a study of the production of wealth. Now economists pay more attention to consumption. For wealth is produced only for consumption. Not only that, they have realized now that production of wealth in a country at any time depends on the level of consumption. For it determines demand and it is demand that stimulates production.
Characteristics of Human Wants
- Wants are unlimited: It means that human wants are without number. Even if some wants are satisfied now some other wants will appear again. For example, a student may want a bicycle and he may get one. But soon he wants a scooter or a motor-cycle. Suppose he gets one. After sometime, he may develop a desire for a motor-car. Again, suppose a poor man becomes rich suddenly, we may think his sudden riches will solve all his troubles. But it is not the case. For the rich man will have his own economic problems. His wants may be unlimited in relation to his limited means. Another thing e have to note is that no man is completely satisfied forever. If one want is satisfied, another want will spring up in its place.
- Wants are satiable: Though wants are unlimited in number, they are limited in their capacity for satisfaction. That is, any particular want can be satisfied for a while. For example, a child cannot get continuous satisfaction from eating some sweets, say chocolates. It is only because we cannot get continuous satisfaction from a single good, we go in search of new goods. The fact that wants are satiable is an important characteristic of wants. It is the basis of the Law of Diminishing Utility.
- Wants are alternative: Wants are largely alternative. It means a particular want may be satisfied in a number of ways, that is, by more than one commodity. If a man is hungry, his hunger may be satisfied by taking some bread or rice or fruits. Again if we want some recreation, we may go to cinema or drama or listen to the radio.
- Wants are competitive: Our wants are unlimited but means (time, money and other resources) are limited. So there is competition among wants. Wants compete for our limited means. For example, take the case of a student. He may get a gift of $50 from his uncle. He may want to do so many things with it. But his money on hand can buy only one thing. All the things that he wants compete for those fifty dollars. So he has to choose among them. This results in the choice of the most urgent or important thing. Thus, the competition among wants results in choice. That is why we say Economics is the science of choice.
- Wants are complementary: Sometimes to satisfy a particular want we need more than one good. One commodity may be useless without another. Thus, a single shoe is practically useless. A pen is of little service without ink. So we require two or more things to satisfy a want. Examples are (1) carriage and horse and (2) car and petrol. Sometimes a commodity taken by itself may satisfy a want independently. Thus, bread alone may satisfy the want of a hungry man. But if it is taken together with butter and jam, one may get greater satisfaction.
- Wants are recurring in nature: No one person can be free from wants forever. Even if some wants are satisfied for a while, they will again appear sometimes at regular intervals. For example, we feel hungry in the morning. Our hunger is satisfied when we take some breakfast. But again we feel hungry in the afternoon and at night. The same thing is repeated the next day and it goes on forever. Thus, wants recur.
- Wants become habits: Some wants become habits. Suppose you take a cup of coffee in the morning. Soon you will find it becomes a habit with you. Like that, many wants become habits. Suppose for some days in the summer season you sleep under a fan. Soon you will feel you cannot sleep without it. It will become a habit with you. A smoke after lunch is another case in point.
Classification of Human wants
Wants may be classified into necessaries, comforts, luxuries and collective wants.
Necessaries may be further classified into necessaries for existence, necessaries for efficiency and conventional necessaries.
(a) Necessaries for existence: There are certain things without which man cannot live. They are absolutely essential for human existence on this earth. They are known as necessaries for existence or necessaries for life. Examples for this are food, clothing and shelter.
(b) Necessaries for efficiency: There are certain things, which are necessary to promote efficiency. For example, an educated person will be any times more efficient than an uneducated person. Thus, education is one of the necessaries for promoting efficiency. By education, we mean both general education and technical education. The working class in a country where a majority of the people are educated will be much more efficient than workers in a country with a high rate of illiteracy. Efficiency depends also on the standard of health of the working people. For that, extension of public health measures are necessary. Hospitals, and periodic medical check-up of the working classes are all necessary to promote efficiency of the people.
(c) Conventional necessaries: Certain wants become necessary by force of habit or custom or convention. Such things are known as conventional necessaries. There are many examples for this. For instance, a cup of coffee in the morning becomes a necessity with some people and with others a smoke after lunch. A dinner during marriage celebration and new clothes for the bride and the bride-groom on the marriage day may also be given as examples of conventional necessaries.
Comforts are not strictly necessary for life but they give pleasure and add to the efficiency of the consumer. Thus, a car to a doctor is not merely a comfort to him. It promotes his efficiency. If he is a busy doctor with a good practice, he can visit a number of patients without waiting for long hours at bus-stops. Similarly, a fan in a shop may promote the efficiency of a business man. If there is a fan, he can stay on in the shop and do some business even during the afternoon, which is usually hot particularly in summer. Otherwise, he has to shut his shop for two or three hours in the afternoon. Similarly, if some comforts are provided for a student, he may study well.
Luxuries add to the pleasure of a person but they do not add anything to his efficiency. Some enjoy luxuries to show off their wealth and riches. Luxuries have “prestige value”. And some luxuries are pure waste. Diamonds and pearls are all luxuries. They have prestige value. Usually they sell at very high prices. Sometimes we find a single person owns many cars. It is definitely a luxury. Kings of the past enjoyed many luxuries. Even today, some merchant-princes enjoy many luxuries.
However, we have to remember that there is nothing rigid about the classification of wants into necessaries, comforts and luxuries. We cannot take any good and say this is a necessary good or comfort or luxury. For what is a luxury to one person may be a necessity to another person. A car may be a necessity to a big business man in a city but it is a luxury to a poor teacher working in an elementary school. Again travel by airplane may be a necessity to the President of a country but it is definitely a luxury to a clerk or a teacher. Again what is necessity in one country may not be a necessity in another country. Thus, woolen clothing is a necessity in a rich country like England with cold climate but it is a luxury in a country with a hot climate.
Again what is luxury at one time may become a necessity at another time. Thus, when electricity was first introduced in England, it was used only by rich families. It was then a luxury. Now it is necessity with most of us. Further, whether a particular want is a necessity or comfort or luxury also depends upon the income of the people and price of the good in question. So the point is this. In classifying wants into necessaries, comforts and luxuries, we have to take into account many things such as the income of the consumers, the status of consumers, the climate of the country, prices of the commodities and so on.
The term “collective wants” refers to the wants of the people as a whole. If I want a shirt, I can pay for it. Similarly, if I want the services of a doctor, I can pay for them. But I cannot afford to pay for a policeman to protect my house at night. The government helps in such cases. It provides goods and services, which meet the wants of the people for which individually they could not afford to pay. Such wants are called collective wants and the goods that are supplied by the government to satisfy such wants may be called collective goods. To satisfy collective wants, the government employs soldiers, police, teachers, doctors and so on. We do not pay anything directly for such services. Of course, we have to pay for them when we pay our taxes.
© 2013 Sundaram Ponnusamy