Investment vs Consumption

Investment and consumption both decrease your fund. Both are the application of your saved cash. Both provide you happiness and satisfaction. Without both, you can not survive in the society.  But there are many difference between investment and consumption, if we go to deep of both through finance and macro economics books. Following are main difference between investment and consumption.


Investment vs Consumption


Basis of Difference
Investment

Consumption

1. Definition

 


 
 Investment is that use of fund which provides us the return and long term benefits.

 Consumption is that use of our fund which provides us short term satisfaction without any return and long term benefits.

2. Example

 


 
 We start our accounting firm by buying computer, furniture and a shop with $ 100000.


 After starting our accounting firm, we feel happy and give party to our friends. Party expenses of $ 1000 is our consumption


3. Propensity



 


 


 
 There is direct relationship between income and investment. Trend of investment will increase, if your income will increase.



 There is no direct relation between income and consumption. By increasing income, risk level will increase and you will surely decrease your consumption and invest money in some secure earning schemes.


4. Factors 





 


 


 


 


 


 


 


 


 
  There are many following factors which affect the level of investment.


a) Innovation - innovation needs more investment.


b) Expectations of high profit - This will increase your investment.


b) Rate of population growth - For making roads, building, schools need more investment.




There are many following factors which affect the level of investment.


a) Economic independence - for becoming independent, you have to decrease your consumption.
b) Status or Ego - for showing status or ego in the society, rich people consume waste products.
c) Decrease in the prices - If prices are decreased, at that time, you will increase consumption. For example, living rent of hotel in hill station will be less in winter. So, you will enjoy in hill station in winter.

5. Average Propensity



 
 - Total Investment / Total income


 - Total consumption / Total income


6.  Types 


 
a)  Induced Investment
b) Autonomous Investment

 a) Linear consumption
b) Non -linear consumption

7. Society Benefits 



 


 


 


 


 


 


  Suppose, you need vehicle for carry your products from one place to other. In market, you can buy a simple vehicle with $10000 which will satisfy your business need, will be your investment. Because you want to give society benefits by your each $ of investment.







 Suppose,  you do not buy $ 10000 value vehicle but you buy just branded vehicle with $ 40000 because you are affected from its advertising. $ 30000 in it will be your consumption because same quality vehicle, you can buy $ 10000 and rest money can be used for society benefits. But you have wasted your money in the form of your consumption.



8. Strategy








 Provide sufficient amount of return is best way to increase investment in specific project.






 More and more advertising online, offline may affect the level of consumption. This is main strategy to increase the consumption of consumers.




9. Govt. Role 








 


 


 Govt. wants to invest money for social welfare. For this, it makes govt. schools, govt. colleges, govt. hospitals, govt. parks etc. All the investment of govt.





Govt. wants to grow our business. But business can not grow without the consumption of society. So, govt. makes its tax system more progress. Burden of this tax will on riches and not on middle or poor society. With this, poor society will buy necessary goods and consume for satisfying basics needs.

 





10. On the Basis of My Personal Thinking

Every investment should be for other needy's help. Suppose, I buy a new computer. But my motive is to help needy through my computer. If I buy inverter and battery. Its aim should be to provide better service to needy regularly. My consumption is to drink food and eat balance food for healthy life. I do not like Fridge and AC and other useless luxuries consumption. It may be your financial investment but in my sense, it is just useless consumption. Because both help to decrease your health. Health is real wealth. So, consumption should be only for physical maintenance and investment should be for other help. I give the example of Krishna of Mahabharata. In Mahabharata, we see that Krishna became the driver of Arjun. Even after king of Mathura, he accepted this duty. He had the power to buy millions of drivers for Arjun. But, he did not trust in useless consumption. During the time of war, he did the service of his horses by himself. He had power to buy millions of servant for serving his horses but he did not want to waste his money in such useless consumption. So, we have to follow that great Shri Krishna before taking any decision regarding investment or consumption. 

Related : Bonds Vs Stock 

COMMENTS

Comments on this Website
.
Share above Content to Your Friends



Name

access account accountant Accounting accounting definitions accounting ebook Accounting education accounting procedure accounting process outsourcing Accounting Software advance advertising africa Amalgamation amendments announcements Annuity assets audit auditing Australia B.Com. balance sheet bank Bank reconciliation banking basic accounting BBA benefits best bill black money blog bloggers book keeping bookkeeping Branch Accounting - full tutorial budget Budget variance business businessman CA calculator canada capital capital budgeting career cash cash book cash flow statement Chiense children china class coaching coins college commerce commerce students company computer computer accounting conference Contact vinod kumar corporate accounting cost cost accounting cost center cost centre CPA credit credit card cs currency data Debit and credit debit cards debt debtor degree depletion depreciation documents dollar domain Downloads Dubai e-accounting earning education Education Loans email employee EPF ERP euromoney examination excel excise duty expenses facebook factor of loan fans feature fifo FII fiji finacle finance Financial financial accounting fire insurance flickr flow forensic forex formula france fraud free fun function fund GAAP GDP gdr germany gold goodwill goodwill accounting google google apps google apps google base google buzz google calendar Google docs google finance google fusion tables google talk govt. GST guide health Hindi Hindi Language history holding company How to treat FBT in Tally 9 HRA ICAI ICAWI ICICI Bank IFRS income income statement Income Tax India indian railway Indonesia inflation inflation accounting infographics information inspiration insurance insurance accounting interest international Internet Introduction of Tally 9 inventory investment invoice IT Japan Job costing journal entries Kalculate keyboard kindle kuwait laptop law LBT learning lease lecture ledger leducation Leverage Analysis liabilities lifo linkedin loan logical point loss loss of profit M.Com. m.phil malaysia management accounting manual accounting manufacturing account market marketing mastercard material MBA MCA media migration mobile money ms word ms. excel multi currency in tally 9 Multicurrency Accounting mutual fund national security new and sacrifice ratio new york times new zealand news NGO nonprofit-accounting North Georgia Mountains NPV NSE odbc office oman online application online accounting otcei pakistan parents pay pal pdf pie chart pie chart of income pnb podcast ppf presentation price privacy policy prize money prof. vinod kumar profit profit and loss account project management provision purchase puzzles quickbooks Quote quotes quotes of svtuition rating agency ratio analysis RBI readers real estate rectification of errors remote control reports reserves responsibility accounting retirement revenue Revenue reserves review risk rupees salary sale saudi arabia saving sbi scholarship school SEBI security service tax share share trading Shares shri lanka singapore sms social accounting society solution South Africa stock stock exchange structure student students study subsidiary company svtuition swiss bank tally tally 9 Tally 7.2 Tally 9 Tally.ERP 9 tanzania tax Tax Accounting TDS teacher teaching technology test testimonial testimonials thailand tips trading trading on equity transaction trend trial balance tuition twitter UAE UGC - NET Commerce UK United Arab Emirates university usa valuation VAT Video Voucher and vouching wikipedia working capital youtube
false
ltr
item
Accounting Education: Investment vs Consumption
Investment vs Consumption
Accounting Education
http://www.svtuition.org/2011/10/investment-vs-consumption.html
http://www.svtuition.org/
http://www.svtuition.org/
http://www.svtuition.org/2011/10/investment-vs-consumption.html
true
2410664366776677676
UTF-8
Not found any lecture VIEW ALL Readmore Reply Cancel reply Delete By Home PAGES Lectures View All RECOMMENDED FOR YOU Category ARCHIVE SEARCH ALL Lectures Not found any lecture match with your request, please help to write it and send it to our email at vinod@svtuition.org for making this website free accounting and finance encyclopedia. Back Home Sunday Monday Tuesday Wednesday Thursday Friday Saturday Sun Mon Tue Wed Thu Fri Sat January February March April May June July August September October November December Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec just now 1 minute ago $$1$$ minutes ago 1 hour ago $$1$$ hours ago Yesterday $$1$$ days ago $$1$$ weeks ago more than 5 weeks ago Followers Follow THIS CONTENT IS PREMIUM Please share to unlock