Consumption Model for Most People
Case for people who want to live in the certain and normal income and consumption
Most people are happy with the permanent consumption and regular income. Because of permanent or certain consumption is caused by income, people want certain income so their model consumption is also permanent. An example; an official government staff’s income in $ 1000 USD per month, he can allocates his income for consumption is $ 600 USD and he saves $ 400 USD. So in one year later, I can say that his total income is $ 1200 USD and his save is $ 4800 USD, while his consumption is $ 7200 USD. What does it mean?
Many people decide to live in certain condition, regularly pattern. So he wants permanent income so he can manage his cost of live well. Next month, he knows well and he has been calculating about his expenses. He wants a certain consumption pattern. When his income arises, he is happier because he can upgrade his income to consumption. Otherwise he doesn’t want his income down, because he doesn’t want it. He doesn’t decrease his consumption model; eat three times a day down to two times a day or $ 50 USD per day down to $ 40 USD per day.
Why he doesn’t decrease his consumption? Many factors affect it, external and internal factors. Internal Factors maybe came from his psychology and habits. If his consumption pattern decrease and one of his activity; let us say traveling must be stopped, his habits become irregularly. Another example, if now his cigarette is Marlboro ($ 50 USD per pack for example), because of his consumption pattern decreases, he must replaces his Marlboro to Lucky Strikes ($ 40 USD per pack). In my opinion, he doesn’t want it. (We assume that the taste of Marlboro and lucky strikes is different and he prefers Marlboro than lucky strikes)
An example to explain external factor is status social. If he lives in area where all people are living in the same income (or approximately). (We assume that the area or people are also having the same consumption pattern) If his income decreases and he rearrange his consumption pattern and the result his live must change with lower allocation to consumption, he fell something different. While his consumption is lower, he will shy and in my opinion his people will ask and make a gossip. He might consider moving another place, finding a new place with same standard.
For those reason, he want live in standard and certain income, so next month he knows well about his live. He doesn’t want live where his next income unknown and secret.
Next post, I will describe about the uncertain consumption pattern, a case for entrepreneur.
