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Consumption Patterns Of Different Socioeconomic Groups Economics Essay

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.
Research question 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

The Economics Of International Business Economics Essay

Myanmar was formerly known as Burma located in Southeast Asia Country. The country has been under military rule for 49 years since 1962 to 2011. It situated between India, Thailand, and China. Even though country located its strategic location, but Myanmar still is the poorest countries in Asia because with almost a third of its population estimated to be living in poverty (U.S State Department, 2012).
In 1989, the authorities Burmese officially changed the country name from Burma to Myanmar. But in 2010, the Myanmar country became the Republic of the Union of Myanmar. After Myanmar independence from Britain, the country became one of a member in many international organizations such as the United Nations (UN), the Association of Southeast Asian Nations (ASEAN) and the World Trade Organization (WTO) (U.S State Department, 2012).
As a leading multinational nutrition Nestlé Company, before starting business in Myanmar, there are five elements should understanding their:
a) Political Economy
b) Economy Systems
c) Legal System
d) Culture
e) Religion
Political Economy Myanmar is a sovereign country and also is a specialist country which had different political compared to other country. Myanmar is a religious country because majority is Buddhism. However, the political system of Myanmar is different from other country.
The political system of Myanmar can be dividing into three stages in the timeline from independence to the current. According to the timeline provided by BBC News Asia-Pacific (2012), Myanmar was independence at 1948 from Britain. During that time, the political of Myanmar is more toward to the democratic. Normally, they had general election on their country and the party who was wined in the general election will automatically practice the government and the leader will become the prime minister of the country. However, the practice of democratic political system did not last for a long time. According the timeline provided by BBC News Asia-Pacific (2012), the democratic political system only practice until 1962. During year 1962, Myanmar starts turn their political system from democratic to the military or totalitarianism. The first person who practices the military political system is Gen Ne Win and he abolishes the federal system and form the socialist or totalitarianism country. He had officially launched “The Burmese Way to Socialism” in 1962, which is meant the nationalizing the economy, that is, resources owned by government and only government have the power to govern the country in Myanmar.
The socialism of the Myanmar had been continues for more than 48 years. During the socialism, Myanmar had become a sovereign and military country. The economy of the Myanmar is worst and only had limited range for economy to grow. The main reason of Myanmar’s economy became worst is Myanmar switched the political system from socialism to the right-wing totalitarianism. After the military take over the country, Myanmar is started slow down their economy even turn the economy back to last economy section with the slow grow. Myanmar decrease their trade with others country and started limit the economy activities in the country. Besides that, the governments also try to take over the economy activities and control all the trade so that there is limited freedom for their citizen or business. In addition, according to the report from Asia Report N°231(2012), Myanmar is related to the country that has similar political system and economy system, such as China, Thailand, and Vietnam. Myanmar is strongly related to those countries because they believed that work together with the countries that have similar political system and economic system will obtain more benefits. For this reason, the businessman from these three countries is very easy to start their business in Myanmar and will force less trouble during the business activity. However, not all of the business activity can be done in their country. The main reason is not because of the military or totalitarianism political system but is the religion. This is because the citizens in Myanmar, either army or politician are very respect to the Buddhism. Therefore, there are some business activity which is opposite the Buddhism’s rule is not allowed to run in Myanmar. Furthermore, due to the strong religion faith, Myanmar trading with the others country decreased and more toward to self-economy system which is only produce enough goods for self country. Although Myanmar is rich in natural resources, but they did not use their natural resources for international trade in order to boost-up their economy.
During these few years, Myanmar is started changing their political system because they believed the military or totalitarianism does not provide benefits and human right for them. Besides that, the military political policy also make Myanmar became the poorest country in the world and unable to keep up with the development of its neighborhoods country like Thailand and Vietnam that is now developing faster and becoming very rich. In order to develop the country from poor to rich, Myanmar started regulates the democratic policy on year 2010 (BBC News Asia-Pacific, 2012). Myanmar try to convert their government from military to the civilian government because they believed the citizen play an important roles in the help of develop their country. After the democratic policy is regulated, Myanmar quickly organizes a general election in the country. According to the BBC News Asia-Pacific (2012), the Union and Development Party (USDP) won the election and the junta had said the election is the process of transition from military rule to a civilian democracy. After the election, Aung San Suu Kyi who is taking part for forming the democracy government is been released from house arrest after a long time arrested by military government. The released of Aung San Suu Kyi can be determined as Myanmar start moved toward to human right country and can protect businessman when they are do their business activity in the country and had more chances for international trade done at Myanmar.
The democracy political system is giving many benefits to Myanmar. The first of the benefits is the chair of ASEAN in 2014. According to Nehru and Endowment (2012), ASEAN sent a message to Myanmar, said Myanmar need to focus more on human rights and democracy in order to chair ASEAN in 2014. If Myanmar successful becomes a chair ASEAN, there will have many benefits for them. The first benefit is they can do their trade with others ASEAN country easily and organizing activities events at Myanmar and more people will know more about Myanmar. The second benefit is ASEAN is a free agent for advertisement because after joining the ASEAN, Myanmar wills easily attract the potential investor to invest their business to its country.
Although Myanmar open more chances for other country for doing business in their country, there are still not enough to prove that Myanmar is a good place for doing the business. This is because Myanmar still had the limited on doing business in their country and the policy for protect the investment and business is still very weak and some is not really useful. Myanmar still does not had a good policy for the business section and some rules for the business is very tight and make the business less potential for development. Besides that, not all area of Myanmar is acceptable to the current government and immigrant’s citizen, some of the area still had the fight with the government so the safety of that area is negative. Furthermore, the costs of implementation the factory in Myanmar is very high because need pay more (bribe) Da loong u mean bribe? to the federal government and local government. Besides the costs, the process for getting approved of doing business in Myanmar is taking long time, so this will affect the profit and effectiveness of the company.
According to the Asia Report N°231(2012), Myanmar’s political transition and economic reconstruction is interrelated. Asia Report N°231 (2012) also mentioned that there is hard for imagine a successful political transition unless the government ensure the economic stability and improvement of the development of the country and needed of the citizen. So, Myanmar is a very challenging country if start a business in the country although Myanmar had a rich on natural resources.
When Myanmar compared to the United States, both country had different political system at the beginning but similar in these few year. Both of the country is democratic country whereas U.S. is stronger than Myanmar and more stable in the political situation when compare to Myanmar which is new to democratic. In economic system, United States is more effectiveness and better then Myanmar. This is because U.S. government had provided a lot of policy or art for the trade or business activity such as Free Trade Agreement (FTA), Asia Pacific Economic Cooperation (APEC), North American Free Trade Agreement (NAFTA), and others (Feinberg, 2003). For Myanmar, they only have few acts or policy to protect the trade and the business activity, so it’s risky and costly to invest the factory or business in Myanmar. However, there is a particular thing that the Myanmar had more advantages than United States, that’s Myanmar’s resources rich than U.S, so when implement the factory in Myanmar, the cost for the material will be cheaper and easily to get compared to United States. Therefore, there are had risk when implement business in Myanmar by the view of political economy.
Economy Systems According to McEachern, there will have three key questions when come to economy: 1) what goods and services are to be produced? 2) How are they to be produced? 3) For whom are they to be produced? Economy systems can explain as the way that one country used to answer this three key questions. Every country in the world will under at least one type of economic systems. For this reason, to expand our business to Myanmar we must first know what economy system Myanmar under. The three basis types of economic systems that generally recognize by the economists are market economy, command economy and mixed economy (Hill, 2012). Now, let’s discuss them one by one before we look at economy system of Myanmar.
Traditional economy system In addition, there was an old economic system known as traditional economy system, society that under this system answers the three key questions according to their ancestors’ act, customs, rituals, beliefs and rituals. (Mxcastro, 2010) In short, they copy the ways that did by their previous generations. Traditional economy system was used in the past but now still will exist in the countries that are farm-based or rural. For an example, Native people of Brazil’s rain forest, the crops they planted, way to harvested, and the goods distributed to who were decided by their past generation and remains unchanged (Tucker, 2010). Therefore, this system decreased the rate of disputes among members but its restricted individual initiative, so will unable to produce advanced goods, new technology and then slow down the economic growth. So then, expand our business to the country that under traditional economy system is not recommended because a country’s practice may differ greatly from a country.
Market Economy Furthermore, market economy is a system that allowed an individual to make decision of economic. In market economies, interaction of the force of supply and demand determines the prices and the prices are used to answers the 3 key questions. That is, what to produce is based on the popular trend and profitable, the producers will produce a product more when the demand for a product exceeds supply because the price of a product will rise and result in higher profit. The question of how to produce is depend on the producer’s choices, if the price and demand for a product is high, producers may use machine to produce in order to save the labor cost because machine can produce more in lower costs. The question of for whom they produce is based on the need or wants of the buyers and the price the buyers willing to accept. In addition, under pure market economies, intervention of government is absent. A pure market economy is also referred to as pure capitalism because both of the systems are market answers the three key questions. Moreover, in pure market economy, mean of production is owned by private, buyers and sellers can make decision or choices as well as free trade for their deals. Also, according to Adam Smith, a country’s resources can be use efficiently and have better economic performance under market economy because it’s provided incentive for each individual to pursue his or her self-interest, known as “invisible hand”. However, pure economy system has some flaws such as people would suffer if without resources, stronger producers may eliminate the competition to monopolize the markets and people no incentive to produce public goods.
Command Economy In command economy system, the three key questions are not answered by market force but government or people with central authority. In more specific, production, distribution, prices and others decision is controlled and regulated by government. In addition, state that under pure command economy owned all the business, there is no private ownership. Also, pure command economy emphasizes on collective goals more than individual goals, so sometime called communism or socialism. Furthermore, pure command economy also has some flaws such as resources do not use efficiently or wasted, absent from cost control, unable to meet the needs or wants of consumer because these resources owned by state, so people have no incentive to do so.
Mixed Economy In mixed economy system, both market and government answers the three key questions, so this system involved both capitalism and communism. Government regulated only some of the markets in mixed economy system and resources in this system are owned by private ownership and public ownership. In addition, government normally take over the things is important to nation in this system such as provide national defense, birth cert recording, highway construction. Most of the people in the world will agree or accept these things to control by government. Also, government may take over the private firm that is failing if the private firm considered important to nation’s economic, for example, firm that have many employees, the government will take over the firm in order to prevent the increase of unemployment rate. Thus, mixed economy system provides the advantages of freedom without the need of government to give up its power.
Myanmar Economy Systems Since year 1988, Myanmar has adopted the market-oriented economic (Aung, nd) with little government regulations which has replaced the centrally planned economy – command economy. So that, the three key questions is answers by market force and each individual can make the economic decision. After adopted the market economy, the initial step that Myanmar takes is promoting and develops the private sector. Now in Myanmar, private activity has about 75%, mainly in light industry and agriculture and has about 25% of activity controlled by state, mainly in foreign trade, heavy industry and energy (WebWhacker, nd). Since Myanmar has adopted the market economy system which allows individuals to make economic decisions, so expand our business to Myanmar may be considered because as a multinational company, we has a lot of experiences of making economic decisions in many different country. Furthermore, foreign direct investment is allowed after Myanmar adopts the market economy system and the Union of Myanmar foreign investment law allows foreigner to fully owned company at there or can be joint venture with a state-owned enterprise, a private company or any Myanmar people, (DPS, 2006) so that we can easily set up our business at there. Moreover, in order to be line with the market economy, private individuals or enterprises are permitted by Ministry of Commerce to implement import and export business which was monopolized by the state in the past. (Aung, nd) For this reason, we can produce our goods at Myanmar with lower costs and export our goods to others country with higher prices. Also, others reason to expand business to Myanmar such as enough of labor force and low labor costs.
Economic Condition – Myanmar v United State United State Unit Myanmar Unit GDP (purchasing power parity) 15290.00
Billion USD
Billion USD
GDP – real growth rate 1.7
GDP – per capital (PPP) 49,000
US dollar
US dollar
Labor Force 153.6
Unemployment rate 9
Exports 1497.00
Billion USD
Billion USD
Imports 2,236
Billion USD
Billion USD
Population 313.847465
Inflation rate 1.7
Legal System In the past, Myanmar was reported having the world’s worst legal system for doing business. According to The Economics Time (2012), a British risk analysis group, Myanmar was offering the least legal protection for foreign companies. But during the recent reforms of Myanmar, new laws are enacted, and the legal practices are changing rapidly. Technical assistance and training which include investment and finance law reform, foreign exchange controls, and the simplification of trading are giving a hand for Myanmar to improve the legal system.
The first legal act for foreigners investing in Myanmar are two types of foreign investment defined: 1) a sole proprietorship wholly owned by a foreign investor supplying 100% foreign capital, and 2) a joint venture in the form of either a partnership or limited company, in which the foreign capital invested must be a minimum of 35% of the total equity capital (Chandler