Household Consumption Analysis in Rawalpindi

sign of the zodiac Consumption Analysis in RawalpindiImran Ejaz1. IntroductionConsumption and merchandise let scotch activities in an economy. Consumption and production go side by side. Consumption creates demand for further production of goods and go. It is non wrong to cite that if in that location is no inlet there is no frugal application in the country. Only the final purchase of goods and advantages is known as custom, and every(prenominal) commercial activity is for production purpose. Consumption can be expressed in ii ways. In nominal, means the m stary spent on the purchase of goods and services, and in real, means the deriving of the utility of goods and services for the satisfaction of wants e.g. using up of consumer goods both durables and non durables. Consumption amounts to the biggest piece of Pakistan which accounts for 81% of Gross Domestic product in 2013 according to public Bank statistics.Consumption is withal termed as the total inspiration on goods and services in an economy. The sparing inhalation consort is utilise to estimate the counterweight of total white plague in an economy. In amicable sciences, the usage bit is a employ to express trend of consumer spending as income of citizenry rising and falling. Consumption function provides an excellent illustration of a line up sequence in the development of the country and standard of bread and butter of the people. Bentham (1748) withal considered production and its usage as important determinants of an economy. The process of brea flimsyg in was feel-sustaining for any system to sustain. Keynes (1936) addresses the theory of role, which showed the relationship between consumer income and use of goods and services. According to Keynes, mass on average, put on behaviour that when their income increase, they spend more(prenominal), but not as much as their income raises. It is made up of autonomous habit that was not influenced by current inc ome and induced use that was influenced by the economys income take.Chow et al. (2001) did a inquiry ab forbidden the Chinese economy and Chinese entrepreneurs who had grown along with the Chinese economy. This look into paper compares and contrasts the economic consumption habits of blue and mettlesome income patronage association and concluded that small businesses incomes are transeunt and more unstable hence their consumption is less and they tend to hold on more on the other hand entrepreneurs who earn more and largely spend on meals, moving from one place to other, private dinner dress fosterage and expensive items as their incomes were permanent and stable oer a period of epoch. Socio-demographic factors, geographic locations of home have significant effects on the tastes and resources. Similarly, cockleing and socializing activities of consumers that were carried out are the second largest expense in their budgets as they need a lot of networking to succeed the business. But number 1 income class spends a larger amount of their income on health issues, education of their masses.Tai and Tam (1997) discussed the consumption deportment of females that was changing due to the assorted socio economic factors such as delayed marriage, smaller family size of it and private parentshave lead to changing dynamics of consumer market as a result the consumer preference werechanging and consumption pattern of the families.Siddiquie (1982) analyzed the consumption patterns based on the Engle law in terms of income, household size and number of earners. The force field showed that the consumption of food and non-food items was strongly affected by the changes in total expenditures and size of households.Consumption patterns in Pakistan have been estimated by Burki (1997) using quantify series selective information.By using Almost idealistic Demand System (AIDS) technique and entropy from 1972-1992 there was an exogenous harvest in non durab le food items demand irrespective of the movements in their tolls and growth. contain focused that the policy makers should focus on own price crack to predict clashing of taxes.This take aim ordain be developed on the basis of Household Consumption in Rawalpindi. The workplace leave alone allow in both cross-sectional and clock era series data of consumer behavior. Questionnaire will to a fault be developed to address the employment beside secondary sources. In this study econometric model will be developed by fetching income, age, family size, consumer price index finger as freelancer variable and household consumption as dependent variable. Expenditure on food items will be used as a proxy variable.1.1 Objective of the studyThe objectives of the study are as followsTo analyze the significance of demographic factors (family size, age) on household consumption expenditure in Rawalpindi.To study empirically the impact of economic factors (income, consumer price index and household consumption expenditure in Rawalpindi)1.2Significance of the studyConsumption is the sole cause and biggest reason due to which all economic activities begins ranging from hiring of services of factors, investing money, constructing factory or building and many more. As if there is no consumption in any order there is no need for activities of any type ranging from running a business or employing somewhere in any capacity. In short it is the consumption so that economies lively exist otherwise not.Consumption is an important function of income but there are many other factors that influence theconsumption pattern there are incidence when two households with same income level may have contrary consumption pattern due to lifestyle, preference and the stage of life cycle they are in as ahousehold greatly affects the consumption patterns. All these look fores try to explore the behaviorpatterns that are crucial for molding the consumption pattern all these explorees ha ve addeddifferent key reasons and not a single seek as been able to come up with any common behaviortraits in the different societies of the world this phenomena indicate that the consumption patternschanging according to society the house hold resides in.Income is the main component on which the consumption depends. The study will incorporate the causal relationship between household consumption to income and household consumption to consumer price index which is the important and refreshful in this study as compared to the work done earlier. This study will be a birds eye view about every citizen consumption pattern which is affected by macro economic variables and demographic factors. inspection of LiteratureThomas (1993). In this paper he move to find out whether all household members share same preferences or they were dictated by any one member of the household. They came to a deduction that when income was in hands of females shares of expenditure increases towards housin g, education, health, household services and recreation when males were addicted the budget they tend to spend excess on health, household service and recreation. commandment was considered intervening variable for earning hence increase in consumption, so they excluded education from demand function and include it as a validated instrument for total income. The researchers have come to these conclusions by conducting linear and quadratic equation models on the complied dataCarroll et al. (1994) conducted a research about habit fundamental law that consumption was happened at same level when a household was not enjoying same level of income as it did previously. Secondly they tried to analyze the impact of consumer sentiments on the consumption patterns taking into considerations the various economic variables into account. They ruled out permanent income and pure life cycle hypo thesis and stated consumer spending was an unclear measure of uncertainty when uncertainty increase d the level of consumption fell down hence leading to precautionary savings.Fei et al. (2003) conducted a research explaining the fact how tykeren influenced the spending patterns of family and in about 27.8% of families, childrens consumption used one third of the familys total income. In 35.6% of families, childrens consumption used 40% of the familys total income. In 19.4% of families, childrens consumption took one half of the familys income. And in 7.4% of families, childrens consumption took over one half of the familys income. Thus in most families, the childs consumption level was higher than the average per capita consumption of the family. He highlighted various factors such as higher education levels for children including extra amounts give for private education and tutors.Moreover more recreational activities and high end gadgets akin mobiles phone, laptops and increased expenses towards health care of the children.Khan and Dhar (2004) carried out a research on behav ioural decision theoretic perspective on luxuriant and utilitarian choices and they found out that difference between purchase and consumption of goods and service. The study found out that there was a very thin line which consumer does not even realize and decision making of consumption was merely affected by income, preference and lifestyle of the consumer.Aydin (2006) carried out the research about the consumption patterns in Turkeys different socio economic classes and found that globalization has led to transformation, reconfiguration and reformulations of class structure and this was leading to social shifts from class based politics to identity politics, ideology to lifestyles and mass production to consumption these forces have fuelled the social change hence leading to emergences of new middle class living a new leisure lifestyle. The research reapproved the fact that social class variables had a significant effect on consumption.Income had the strongest positive effect at all the consumption level simultaneously. Education had effected the class differentiation, i.e., the group with higher education had better living standards thus making education important mediating factor. The analysis in this research paper depicted the class structuration results due to interaction income, education levels, and residential location..Dorlando(2010) carried out a research to investigate the importance of behavioral principals in micro-foundation of Keynes consumption theory. It was concluded that behavioral instead of maximizing principals can be rightfully considered as possible for micro foundation for Keyness work. He said there were chances of cross fertilization of Keynesian approach and behavioral sciences in reference to theory consumption function. This research showed that utility maximation was not the major focus Keynes representation of individuals behavior and many subjective factors were included in the consumption theory finally the traditional a ggregate consumption function is immensely based on maximizing agents.3. MethodologyVariables taken in the study will be both demographic and economic variables which are to be estimated.In this research thesis both time series and cross sectional data will be used. On economic variables including consumer price index, income and expenditure will be taken. Consumer price index data are time series for 2004-2014 (10 years) and data on income, expenditure, family size and age are cross sectional. Interview by questionnaire will be undertaken from different income groups of the people living in Rawalpindi to gather the data on factors effecting consumption of household. To obtain the estimates of household consumption an frequent Least Square method will be used which meets econometric criteria. In this study two equations will be developed, equation one which will shows the consumption of household who belong to low income class piece equation two will represents the consumption of household belong to high income class. In the study CPI, will be taken as independent variables which affect the consumption as if there is increase in price level for food and non food items over a period of time it would lead to put down consumption of the masses as it would lead to reduce the purchasing power of money. The people who can afford to deprave more goods before inflation now with the same amount of income they can buy less goods after inflation.3.1 DataThe population in this study pay off of the District Rawalpinidi. Data will be collected through questionnaire from different classes of people besides secondary sources available on other variables.The hear data on the variables will be collected by interviewing different people through questionnaire from the different class of people residing in Rawalpindi and also from secondary sources on periodic basis so that model shall gives true picture regarding the society behavior of the factors affecting consumption.G enerally data has two types in statistics1) Primary datafirst hand data2) vicarious dataearlier data availableIn this study first data will be used for some demographic singularity i.e. age and family size and income. Due to non availability of second hand data on variables like family size and age, and income survey will be conducted in Rawalpindi. The sample will include all the heads of households.By considering the resource and time constraints, method of ordinary least square will be used for which sampled peoples will be surveyed in the area of district Rawalpindi for the study.For addressing the issue, a determined of few questions will be developed required for the study to be carried out. The study shall be rely both cross section and time series data values. A set of questions will be get hold of from the respondents to avail the data on demographic features. A questionnaire will be circulated to different groups or sectors including the Public Sector, and Private Sec tor. The secondary data will be taken from the sources which includes Pakistan Statistical Bureau and from Pakistan Social and Living beat regarding the consumer price index variable.3.2 ModelCHH=f (YL, YH, A, FS, CPI)Dependent VariableCHH= fair Household Consumption Expenditure (Rs per month)Independent VariableYL= lower income class (Avgerage monthly income less than or equal to Rs 25000)YH=High income class (Average monthly income of more than Rs 25000 and less than or equal to Rs 40000)CPI=Consumer price index (index to measure inflation on per month basis)A= Average bestride of household (years)FS=Family Size (No of persons)On the basis of variables the following equations developed for appraisal purpose.CHHL=o+1iYL+2iFS+3iA+4iCPI+i Equation 1CHHH=o+1iYH+2iFS+3iA+4iCPI+iEquation 2Whereo = Intercept 1, 2, 3, 4, is the slope co-efficient of the model.i = Disturbance term of model.i = add together of households (i 1 to 120)Effects of different variables on household consum ption logical argument supposititiousally expected effect1+/-2+/-3+/-4+/-ReferencesAhmad, E., Shamim, F. 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