Definition of Investment and consumption
Consumption and investment are two related activities. Postponement of consumption can now be interpreted as an investment for future consumption. Individuals do consumption by using existing resources to obtain or utiiti satisfaction (utility). Each individual is assumed to prefer more consumption to less than consumption. This assumption means that the marginal utility of consumption is positive, ie the addition will increase the consumption of utility (satisfaction). Another assumption is that the marginal utility of consumption is decreasing in nature, namely to increase the utility for the same consumption will become smaller than before.
- Investment is the delay of current consumption for use in the efficient production during a certain period of time
- Consumption is the use of the definition of resources available to get the satisfaction or utility.
Consumption and investment are two related activities. Postponement of consumption can now be interpreted as an investment for future consumption. Individuals do consumption by using existing resources to obtain or utiiti satisfaction (utility). Each individual is assumed to prefer more consumption to less than consumption. This assumption means that the marginal utility of consumption is positive, ie the addition will increase the consumption of utility (satisfaction). Another assumption is that the marginal utility of consumption is decreasing in nature, namely to increase the utility for the same consumption will become smaller than before.
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