Page 28 - Ekonomija i Biznis_noemvri 2015.indd

ECONOMY

NOBEL PRIZE IN economics SCIENCES 2015:

CONSUMPTION OF HOUSE-
HOLDS BETWEEN WELFARE
AND POVERTY

The Nobel Prize in Economic Sciences for 2015 has been awarded to Angus Deaton,
a professor at Princeton University, USA, for his contribution in the “analysis of
consumption, poverty and welfare” (according to the Nobel Committee). It is a kind
of reminder of the simple fact that the ultimate goal of the economic activity is still
the improvement of people’s welfare. The individuals are engaged in an economic
activity in order to earn income which will enable them to consume goods/services
by means of which they will meet their distinctive needs, i.e. they will reach a certain
level of welfare. The level of consumption reflects the economic welfare of the main
consumption entities – individuals or households.

Vladimir Filipovski Consumption is an issue in says that the consumer/the household
both microeconomics and distributes its disposable income ac-
The author is Professor at the macroeconomics. The mi- cording to groups of goods depend-
Faculty of Economics, “Ss. Cyril croeconomic analysis of con- ing on the price of each good and the
and Methodius”University sumption comprises of anal- mutual relation of prices for different
ysis of the demand for a single good, goods: here the function of the goal is
28 based on either a single consumer or on to maximize the total satisfaction of
the aggregate market demand for the consumption with a given budget limi-
product. The Nobel Prize laureate An- tation (the income), which on the other
gus Deaton provides a significant con- hand depends on the way how the con-
tribution to the macroeconomic analy- sumer ranks different goods according
sis of demand by setting the so called to their importance (i.e. what is the
Almost Ideal Demand System. structure of the consumer priorities).

The basic economic model of demand Since different consumers/house-

November 2015