For the purpose of research, I have basically analyzed different literature reviews.
Consumption and production are the two most important sectors in the economy. According to Reisman (2006), both consumption and production are the two fundamental views of economic life. He explains that throughout history there has been a debate over the introduction of policies that can improve the consumption or the production. While in some of the Eras economists like Adam Smith argued that there should be an emphasis on the expansion of production, others from the seventeenth century gave more importance to the consumption sector. The economists from the twentieth century have also stressed the expansion of the desires of the consumers rather than the opposite expansion of the production. Overall, there have been many theories about the relative importance of both the consumption and production. This paper discusses a few but before the theories are discussed it is important to know why the consumption and the production are the two crucial determinants of the success of an economy.
Since the concepts relating the consumption and the production are different according to different theories, there is no set definition of consumption and production. However, consumption may be crudely defined as the final purchase of goods and services. Production on the other hand is the economic process that converts the inputs into outputs. Hence, the production includes the creating of the output and the consumption constitutes of the buying of the same output in the form of finished goods and services.
Consumption and production are very important because they are actually the building blocks of the economy. Production means that the firms and the organizations can make use of raw materials to produce goods and services for the consumption process. The consumers on the other hand consume the products and the services and provide revenues and