Difference between investment and consumption. Let’s say you have Rs 1 lac with you. With the Rs 1 lac you start a business. The business earns Rs 20,000.

Slides:



Advertisements
Similar presentations
Understanding the Inverse Relationship between Bond Prices & Yields – By Prof. Simply Simple TM Why do bond yields go up when bond prices go down?
Advertisements

Understanding the Difference between Supply Side Inflation and Demand Side Inflation.
Understanding Credit Spreads – By Prof. Simply Simple
Domestic Market operations by the Reserve Bank Mr.Sassine.
In both bonus shares and stock split the number of shares of a company increases. But what are bonus shares and what are stock splits and more importantly.
P/E Ratio – By Prof. Simply Simple The P/E Ratio or Price to Earnings Ratio looks at the relationship between a stock price and companys earnings It is.
Understanding the Measurements of Money Supply – By Prof. Simply Simple We had earlier covered Velocity of money – which is a term used to denote the number.
Understanding why the dollar continues to gain value despite S&Ps downgrading of the US bond.
You would have read in several newspapers about the pressure on China to appreciate its currency – Yuan. Lets try and understand the reason why China likes.
We all know that bonus shares exist. But why are they issued in the first place? Let me try & simplify this for you… Why Are Bonus Shares Issued? – By.
AGGREGATE DEMAND With Mrs. Eskra. OBJECTIVES: What will you learn? What Aggregate Demand is and what it looks like. Three reasons AD slopes downward:
Savings Savings grows money. Save for future needs and wants.
Tutorial 3 ECON 111.
1 Impact of Change in Income Here we want to consider the change consumers will make if they experience a change in income.
Understanding “Margin Money” in derivatives – By Prof. Simply Simple TM I hope the last lesson on ‘Put Option’ in the real world helped you in getting.
Understanding ‘Sharpe Ratio’ – By Prof. Simply Simple TM When you decide to buy a car what is it that you evaluate? Is it only speed? size? fuel efficiency…
You're watching the news and they're talking about a recent announcement from RBI, in which it is hinted that the interest rates may be raised in the next.
Coin Value Click here to begin Click here to begin.
Understanding QE & Capital Flows – By Prof. Simply Simple TM These days we read a lot about “QE & Capital Flows”. They appear to be a part of most discussions.
Understanding “US debt ceiling crisis”. The US debt ceiling crisis has been in the news. Hence it is important for us to conceptually understand this.
Understanding relationship between “exchange rate” and “exports” By Prof. Simply Simple TM Many magazines mention that “to improve exports, the central.
Understanding ‘Money Supply Expansion” and “Run on a Bank” (New Version) – By Prof. Simply Simple TM Sometime back, I had covered a lesson on the working.
How does price discovery take place in the stock market? Understanding Price Discovery in the Stock Market – By Prof. Simply Simple TM.
By: Jamelle Horne.  Important because it allows you to purchase items that would not be accessible to you without good credit.  Applying for loans becomes.
Counting Pennies Click here to begin Click here to begin.
Counting Quarters Click here to begin Click here to begin.
More, But Not Of The Same. Further Analysis Remember that I + G + CA = S + T. I, however, contains planned or demanded investments (I D ) + unplanned.
Impact of Change in Income
1 Money Market. 2 In these notes that follow we will refer to short term interest rates. An important short term rate is the FED FUNDS rate. This is the.
Understanding the connection between a strong dollar and job losses.
Chapter  Savings are money people put aside for future use. Generally people use their savings for major purchases, emergencies, and retirement.
MEANING OF MUTUAL FUNDS :- A Mutual Fund is a financial intermediary that pools the savings of investors for collective investments in a diversified portfolio.
 How does demand and supply change when things happen in the economy, like:  Inflation  Unemployment  Levels of spending  Real output  We look at.
THE GREAT DEPRESSION BEGINS CAUSES OF THE DEPRESSION.
Understanding the fall in the value of the Indian Rupee.
Why is it that When equity markets are bullish we say the “Sensex” has “gone up” or “Equity prices” have “gone up” or “NAVs” have “gone up” BUT when bond.
WARM-UP 1.The Internet is considered a Free Market – tell me 5 ways that the internet has changed our economy?
Understanding how “Investments” help the economy.
What is asset allocation all about? If asset allocation means diversification, then may I ask what is diversification? Asset Allocation is at the heart.
What is Your Interest? Discover the impact and power of interest.
Chapter 11 Section 1.
Today’s Warm Up Based on the functions of the Fed you studied yesterday, which do you think is most important and why?
Investment You will not be able to work forever and saving for retirement becomes a must = financial goals must be made for financial security. Investing.
Value: How our economy is measured. Money/currency: The cash and coins we use. Treasury: controls the currency of our country. Economy: Products, people,
The Story of Oil Bonds – By Prof. Simply Simple The most talked about subject these days is whether petrol prices will rise even further or not and if.
Understanding “wage price” spiral. Inflation is on the headlines, day in and day out. It is giving the government, industry and the common man sleepless.
CHAPTER ONE PERSONAL FINANCIAL PLANNING. Chapter 1 Objectives… How to create a financial plan How to develop your personal financial goals The opportunity.
The Loan Welcome! So you’re looking to finance a car? Before you look at taking out loans make sure that you are financially able to pay for a vehicle.
Keynesian Income Determination
The Stock Market It’s Time to Make some Money!!!
LLLLLLLeeeeeeeeettttteerssssss. Read the definition and then put the letters in the correct order in order to find the word defined.
Understanding the difference between “deficit” and “debt”
The Stock Market Content Objectives: Students will learn about the stock market and how it effects the economy. Language Objective: Students will be able.
Aggregate Demand BY AARON, SEB AND ELENA. Definition of Aggregate Demand  Aggregate Demand is the total demand for goods and services produced in an.
ALSARHANI YAHYA 1 REVIEW Could you answer these question: 1. What is the accounting? 2. Who uses Accounting Data? 3. What is the basic accounting equation?
Types of Investments Stock: Stock refers to shares in a company. An individual can purchase stocks of a company as a form of investment.
The Federal Reserve System. Prior to 1913, hundreds of national banks in the U.S. could print as much paper money as they wanted They could lend a lot.
Understanding the connection between a strong dollar and job losses.
Economics Unit 3 Lesson 5: Inflation/Deflation. What Makes Money Important? 1. It’s a Medium of Exchange. Money is valuable because it is accepted in.
Understanding the Relationship between Devaluation, Beggar Thy Neighbor and Currency War.
Understanding ‘Derivatives vs. Cash’ – By Prof. Simply Simple TM Why is ‘derivative trading’ a form of high gain - high loss trading with minimum investment.
Understanding the fall in the value of the Indian Rupee
Understanding the fall in the value of the Indian Rupee
PRICE DISCOVERY IN THE STOCK MARKET
Econ Ch 2.2 The Free Market.
FALL OF THE INDIAN RUPEE
INVESTMENT AND CONSUMPTION
Difference between investment and consumption
Understanding the difference between “deficit” and “debt”
Presentation transcript:

Difference between investment and consumption

Let’s say you have Rs 1 lac with you. With the Rs 1 lac you start a business. The business earns Rs 20,000 per year. Clearly you’ve added to the value of Rs. 1 lac By Rs 20,000 This is known as investment because you increase the value of the money

Let’s say you buy a car with the Rs 1 lac If you didn’t have a car of your own earlier, this car brings comfort and enhances your efficiency. The car takes you to your office in more comfort. You’re able to work more and work better. Your social status increases and your boss is pleased by your performance.

He gives you both a promotion and a raise. If you were earning Rs 50,000 per month earlier, your new raise has let’s say taken it to Rs 75,000 per month You’ve thus increased your wealth by 50% per month. This “car” purchased too can be considered an “investment “ because it helps to increase your wealth

Now let’s say you spend Rs 20,000 on the car by changing its upholstery Clearly this spending is “consumption” because the changed upholstery would hardly have an impact on increasing your overall wealth.

So the spending that increases your overall “wealth” is an “investment “while the spending that does not increase your “overall” wealth is “consumption.”

Investment and consumption are also two sides of a coin. If you were to buy shares of the company making upholstery which you bought, it would be investment while purchase of the upholstery was “consumption” So how are you impacted if the price of the upholstery goes up?

If the price of the “upholstery” goes up, you’ll certainly feel the pinch as a consumer. However as an investor you may laugh all the way to the bank if the share prices go up on account of high demand of upholsteries.

Hence clearly it is important that there is both consumption and investment in an economy for the economy to grow in a balanced manner. On the other hand even you as an individual need to partake both in consumption and investment to enjoy a balanced life which gives you returns while at the same time allowing you to enjoy some luxuries of life

Hope this story has further clarifies “investment and consumption” Please give us your feedback at “Do you want to meet the Professor in person?” if yes please click here:

Feedback: Privacy Policy Feedback
Do Not Sell My Personal Information
About project: SlidePlayer Terms of Service

© 2025 SlidePlayer.com. Inc. All rights reserved.