A consumer is someone who is the final user of an item–a good or service. For example, when you eat, you consume the food. You are the final destination, the final user of the food, making you a consumer of food. When you use a laundromat or dry cleaner to clean your clothes, you consume the services of the laundromat or dry cleaner, making you a consumer of laundry services. When your classmate draws you a Valentine’s Day card and gives it to you, you are the consumer of that card.
The items you consume are collectively called goods and services by economists, or goods for short. Everything you consume is by definition a good. Economists sometimes use the longer term “goods and services” as a reminder to emphasize that they are not merely talking about physical goods.
Do not be confused by the word “good.” Some things called “goods” by economists may not feel or taste “good.” For example, you may hate liver, but you might sometimes eat it just because your mom cooked it for dinner. That makes you a consumer of liver, and it makes liver a good in the terminology of economics. The economics course you take in college may not be as much fun as playing frisbee, but it’s still a good in the terminology of economics, and you are a consumer of that course–a consumer of that good, a consumer of those education services.
Most things called goods are usually used up and unavailable to others once they are consumed. That is, once you consume a hamburger, that particular burger is no longer available to any other consumers. And, while you can just hear your kid brother thanking you that you, not he, consumed the last of the liver at dinner, nevertheless, your family as a unit became the consumer of that liver–that liver’s final destination.
Some items you consume are not used up but instead can be used or reused by others. For example, if you read a hardcover book, you can hand that book on to someone else to read when you are done. In the language of economics, both you and the other reader are both consumers of the book. The same is true of reading a webpage online or taking a walk in the park. What you read or where you take a walk does not destroy or use up the item in the same way as your consuming food. You and everyone else who reads the book or walks in the park are nevertheless all consumers–the end of the line for consuming and benefiting from that item or its services. For more about that kind of good or service see the topic of Public Goods at Market Failures, Public Goods, and Externalities.
Consumers are sometimes contrasted with producers. For example, a company that manufactures toothpaste is a producer; and when you buy that toothpaste, you are a consumer. However, note that often people both produce and consume the same item. If you grow some tomatoes in your garden and then eat them when they are ripe, you are both a producer and a consumer of tomatoes. If your dad cooks mac and cheese for dinner and then sits down and eats it, he is both a producer and a consumer. Even if he doesn’t eat any himself, the family as a whole can be described as both a producer and consumer of dinner services. For more on this topic, see Producers.
Finally, note that consumption goods like food are sometimes contrasted with capital goods (sometimes also called investment goods)–goods that are not fully consumed all at once but that may last for a while. For example, unless you ride bulls at rodeos, you probably get more than one use out of your jeans, wearing them many times. You are indeed the consumer–the final user–but each time you wear them, you only consume a portion of their total use. When you turn on a lightbulb, you consume its lighting services, but the lightbulb itself usually continues to function and produce additional lighting services for other users. All the users are consumers, even though the item itself is not used up in that one use. The terms “Consumption”–sometimes written with an upper-case “C” to make the distinction clear or sometimes with the two-word term”consumer spending”–may also refer to a macroeconomic concept meaning not merely your individual consumption but the total consumption for an entire country or economy. For more on capital and investment goods, see Saving and Investing; and for more on consumer spending, see GDP.
Definitions and Basics
Consumer, from TheFreeDictionary.com:
1. One that consumes, especially one that acquires goods or services for direct use or ownership rather than for resale or use in production and manufacturing.
Consumer Protection, from the Concise Encyclopedia of Economics:
When you buy a good or service, you rarely have perfect knowledge of its quality and safety. You are justifiably concerned about getting “ripped off.” Thus the need for consumer protection.
Economic activity flourishes when consumers can trust producers, but the consumer must have grounds for trust. Consumers value, then, not only quality and safety, but also the assurance of quality and safety. Trust depends on assurance….
Benefit-Cost Analysis, from the Concise Encyclopedia of Economics:
Suppose, for example, we wished to evaluate the benefits and costs of a proposal to control air pollution emissions from a large factory. On the positive side, pollution abatement will mean reduced damage to exposed materials, diminished health risks to people living nearby, improved visibility, and even new jobs for those who manufacture pollution control equipment. On the negative side, the required investments in pollution control may cause the firm to raise the price of its products, close down several marginal operations at its plant and lay off workers, and put off other planned investments designed to modernize its production facilities.
How do we determine the willingness to pay for the favorable effects? First, it is relatively easy to value the reduced damage to materials. If, say, awnings will now last ten years rather than five years, it is straightforward to multiply the number of awnings times their price to get an idea of savings to consumers—so long as the price of awnings is not affected by the policy. If reduced pollution meant more agricultural output, it would be similarly easy to value because crops have well-defined market prices. In other words, when benefits involve marketed outputs, valuing them is not terribly difficult….
Consumer Price Indexes, from the Concise Encyclopedia of Economics:
Most of us are familiar with the prices of many things we purchase. We know what we paid recently for a pound of ground beef or a quart of milk. Renters know how much they pay in rent. Measuring prices, therefore, may seem simple and straightforward, but it is not….
In the News and Examples
Advertising, from the Concise Encyclopedia of Economics:
Economic analysis of advertising dates to the 1930s and 1940s, when critics attacked it as a monopolistic and wasteful practice. Defenders soon emerged who argued that advertising promotes competition and lowers the costs of providing information to consumers and distributing goods. Today, most economists side with the defenders most of the time….
While discussions of advertising often emphasize persuasion and the creation of brand loyalty, economists tend to emphasize other, perhaps more important, functions. The rise of the self-service store, for example, was aided by consumer knowledge of branded goods. Before the advent of advertising, customers relied on knowledgeable shopkeepers for help in selecting products, which often were unbranded. Today, consumer familiarity with branded products is one factor making it possible for far fewer retail employees to serve the same number of customers….
Cowen on Liberty, Art, Food and Everything Else in Between, EconTalk podcast episode, Mar. 12, 2007.:
Tyler Cowen, co-blogger (with Alex Tabarrok) at MarginalRevolution.com, talks about liberty, global warming, using the courts vs. regulation to protect people, the challenges of leading a country out of poverty, the political economy of cuisine, and a quick overview of the Washington, DC. art museum scene. …