Consumption is a topic on which a lot of reach has been carried out by the economist and psychologists to know what leads to different levels of satisfaction from consumption what factors lead to variation in consumption patterns of households with same income levels. This research paper intends to find out important factors that influence the consumption levels of various households, whether the individual preference has impacts or not while making consumption decisions on a household level. What boundaries restrict the consumption levels? The consumption pattern in Pakistan has improved over the years for various reasons such as increase in incomes and more availability of different kinds of goods and services but there always have been class conflict present hence disparities among rich and poor. So the growth in consumption has been in different amounts among the different socio economics groups this lead to an immense increase in the social stratification. Apart from factors such as size of the family, occupation, structure of the family, standard of living and location one of the factors that has direct relation with the consumption is population if the population of the population increases the consumption level changes drastically. Similarly if the population consists of elderly or has baby boom the pattern of consumption is affected greatly the type of goods and services produced in the economy is affected moreover consumption patterns influence the dispersion of income and at times leads to motivation for earning a higher wage and this thesis would provide us with the deeper understanding of consumers and their household consumption patterns
Background of the topic
Consumption function in economics is the relationship between consumer spending and the various factors that are determining it the consumption function comes into formation due to accumulated spending of all the households in the economy hence the Economic level the characteristics of consumption functions are important for many questions in both macroeconomics and microeconomics. At the household or family level, these factors may include income, wealth, expectations about the level and riskiness of future income or wealth, interest rates, age, education, and family size. Individual level the consumption function is also influenced by the consumer’s preferences (e.g., patience, or the willingness to delay gratification), by the consumer’s attitude toward risk, and by whether the consumer wishes to leave a bequest. Theories and hypothesis were developed by Keynes on consumption patterns these were evolved from the early studies that supported the fact the short run marginal propensity to consume was much more stable when compared with average propensity to consume. Economist further more refined the original work of Keynes and came up with theories permanent income hypothesis, theory of life cycle hypothesis and demonstration effect hence they were able to establish the fact that consumption was extremely responsive to income changes on which Duesenberry tried to refute it with demonstration effect hypothesis. These theories still could be found in various economic text books
Economists developed Engel curves these curve showed consumption levels and patterns graphically they even derived budget constraints curves with the help of indifference curve providing a lot of evidence as how and what effects the consumption that in turn shows the status and the lifestyles of an individual household in the economy.
Importance of the study with respect to the world
Consumption level helps in identifying the level of demand of goods and services in the economy and the type of goods and services’ hence saving hampers consumption and can greatly affect overall demand in the economy if there is a lot of saving in the economy marginal propensity to consume goes down so saving and consumption has a negative relationship. This could lead to greater problems at a macroeconomic level such as reduction in aggregate demand and unemployment of resources in the economy here government needs it intervene to improve the economy this would be achieved by increasing demand by increasing the government spending.
These days consumption patterns are highly influenced by multinational or transnational companies this phenomena is known as mass consumption or consumerism. Consumption of goods produced by MNC’S or TNC’s has lead to adoption of different cultures and consumption patterns in a local household a common example of this would of Mc Donald’s today you might be in any part of the world but you would always find a branch of Mc Donald’s due to globalization in the economy would lead to greater choices that an individual would face while making consumption decisions hence changing consumption patterns of a very traditional economy like Pakistan. Other factor that could potentially change the consumption pattern would be technology as traditional goods and services would become redundant and would no longer will be demanded hence this would lead to fluctuation in consumption level as well as the pattern
There is high inequality in consumption patterns among different countries due differentiation in social classes differentiation and difference in per capita income, population and various other factors there are market biases on the bases of luxury or mass consumption of goods.
Importance of study with respect to Pakistan
Since Pakistan is developing country it has a lot of different classes and a lot of population mostly consisting of children and teenagers with such a heterogeneous society there is a lot of difference in consumption level and patterns they are influenced by income, religion, locality in which a particular household resides and the occupation of the head of the household is since Pakistan has a strong culture of saving and transferring bequest to future generation hence how does a particular household decides what to consume and how to consume?
We consume a lot differently when compared with the western society as they focus on more luxury items and consumer durable goods on the other in our society households focuses on basic necessities of life. More over there is a lack of studies that have been carried out on the consumption pattern of socio economic groups that are prevalent in Lahore.
Reference groups play an important role in determining the consumption patterns of various households and demonstration effect has the strongest effect on the consumption of the households in Lahore among the various different classes. This research paper would help to unravel the preference of the households and the types of goods that they consume and how do they decide and come to common grounds while they consume as in single unit of family since we have a very strong culture of living together in extended families. As many generations are living and consuming together the basket of goods and services that they consume would be highly differentiated. But these days trends are changing and people are moving towards nucleus family system and Pakistan is enjoying a lot of female participation in work force hence will this new trend affect the way a family consumes as a household? Secondly Lahories as consumer have a lot of choice and since at this day and age a lot trend is shifting toward mass customization this research paper would allow to analysis such trends in Lahore.
Consumption patterns of different socio-economic groups take into consideration the three main social classes the elite class, the middle income group and the lower income group that resides in three different localities of Lahore namely interior Lahore or the old Lahore, Allama Iqbal Town and Defence housing authority. Households with different casts and religion would be targeted to cover the maximum number of the different socio economic group. There is a lot of diversity in terms of socio economic groups in Lahore hence their consumption patterns also varies drastically they have income that ranges from 3000 rupees monthly to more than 80,000 rupees.
A developing country like Pakistan faces a lot of discrimination in terms of income disparities, low income per capita income and a growing population that