Self-consumption

economic-dictionary

Self-consumption refers to the circumstance in which a person uses the goods or services that they develop themselves to satisfy their own needs. This, instead of selling such products on the market.

In other words, self-consumption means that the individual performs an activity, but the fruits that result from that work are not marketed. Instead, they are used by the worker himself.

The concept of self-consumption is closely linked to the subsistence economy and, mainly, to agriculture. Thus, there are producers who consume all or part of the food they harvest. This is due to various circumstances. It may be, for example, that there is no modern means of communication that connects the peasants with the large markets.

Characteristics of self-consumption

Among the characteristics of self-consumption we can highlight:

  • It is observed mainly in developing countries.
  • Although it is mainly related to agriculture, it also applies in the case of some services. For example, if a person repairs his own computer.
  • Self-consumption is declining around the world. This, as a consequence of the decrease of the rural population.
  • When farmers live in an economy of self-consumption, this can cause their diet to be not entirely varied. Consequently, people's health status will not be optimal.
  • The theory of comparative advantages suggests that self-consumption is not optimal. Ideally, the person specializes in producing what is most efficient and sells the result of their work. Then, with your income, you can purchase the goods or services that best meet your needs.

Self-consumption in companies

The term self-consumption can also be applied to describe some business operations. Specifically, in two types of situations:

  • External consumption: The ownership of an asset is transferred from the company to the partner or entrepreneur. For example, if the owner of a firm decides to take a notebook and pen that were part of the inventory for his personal use.
  • Internal consumption: The property of the good is not transferred. For example, if a company that sells coffee makers makes one of its machines available to its employees so that they can serve themselves coffee while they work.

Examples

We can cite some examples of self-consumption such as the following:

  • A farmer in the Andes mountains grows potatoes to offer them in the nearest town that is several kilometers away. But it only manages to sell a part because the number of potential buyers is very small. Then, the remaining stock must be consumed by the producer himself and his family.
  • A company sells vacuum cleaners, and decides to use one from the warehouse to clean the office.
  • A family in the United States has their own garden where they grow various vegetables that they consume almost daily.

Tags:  economic-dictionary Argentina accounting 

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