how are production consumption and investment interrelated?
Answers
Production, Consumption and investment are interrelated.
Production:
Production refers to the method of creating goods for serving the purpose of consumption. Goods are produced on demand, i.e. the willingness and ability to want a good or service.
Products are produced and sold in the market.
I.e. the manufacturing of goods.
Consumption:
This refers to the usage of goods and services, which provides utility or satisfaction to the consumer who comes in contact with the product of their demand.
The activity of utilization of resources.
Investment:
This is the process of investing monetary values, in order to gain profit. For instance, investing of money, through purchasing of shares in a company. As the value of shares rise, the investor sells it, and gains profit over the original amount spent.
These all are interrelated because, producers produce for the sake of selling, for the sake of the consumers who involve in consumption pattern. Similarly, investment is also important, as people investing, is also a form of consumption, the utilization of resources. The demand, supply of these are interrelated. As the buying pattern depends on the availability of resources in market.
The production, consumption and investment are all related to each other. The goods produced by the manufacturers are made for the consumption of the consumers. The people use their income for buying the goods and services. The investment factor is the value of the equipment's, machines, plant, building and more that are involved with the production process.
Explanation:
- The production process is used for producing goods according to the demand of the people. People use goods for their consumption purposes.
- Investment helps to enlarge the base of production for contributing to the present demand for goods which has an impact on the production and results in an increase in the capacity of production.
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