Consumers are the basic economic entities of an economy. All the consumers consume goods and services directly and indirectly to maximise satisfaction and utility.

Consumers have limited income and by which they want to satisfy their maximum utility (utility is the want satisfying capacity of a commodity).

Generally, consumer means an individual only; however, consumers will consist of a particular individual, a group of individuals, institutions etc.

Types (Kinds) of Consumers:

According to the nature of consumption, consumers are of following types:


(i) Direct Consumers:

History tells us that at the very early stage of civilisation producers produced all the basic needs of life for themselves and their families. All the basic needs like food, clothing and shelter they produced for their own and their family’s consumption. Hence, the producers were producing goods for their self- consumption. Thus, they were called as direct consumers or direct producers also.

(ii) Consumers by Exchanging Products:

With passage of time and civilisation people understood the benefits of exchange. Hence, they tried to specialise on a particular or few products and then tried to exchange the product with the other product(s). The exchange started with barter system and now continuing with monetary system.


This will create the concept of marketable surplus, i.e., the producers are not only producing goods for self-consumption, but some excess or surplus product(s) they are keeping to get other product(s) in exchange. For example, a farmer producing pulse not only for self-consumption but the extra or surplus pulse he will exchange with the producer of other product, say paddy.

(iii) Modern Consumers:

These consumers only go to the market to buy the goods and services available in the market through money only. Here, the producers are also producing goods or services directly sent to the market for the consumers. These consumers buy all the goods and services in lieu of money. The modern consumers are the outcome of monetary system.

Importance (Significance) of Consumers:

The importance of consumers in different avenues is discussed below:


(i) Encourage Demand:

Consumers are the main source of demand for all the goods. The producers of industrial goods or the producers of agricultural products are all producing the various items according to the demand in the market. According to Prof. Marshall, it is the demand which controls the production or market. Hence, the consumers create demand in the market and producers produce goods or services accordingly.

(ii) Create Demand for Various Products:

The different consumers have different types of demand or a single consumer can also demand different types of products. These will encourage the producers to produce various types of products in the market. For example, some consumers want to consume paddy, whereas some consumers want to consume wheat.

However, there are some consumers; who want different qualities of paddy and wheat also. Thus, there are some consumers who prefer red colour soap whereas other’ consumers prefer green colour soap. Therefore, to satisfy all the types of consumers, producers must increase the production of various products.

(iii) Increase Demand for Consumer Goods:

Consumers create more demand for all the types of consumer goods, like durable, semi- durable and perishable goods. Durable consumer goods include furniture, utensils, televisions, etc. and for semi-durable goods like clothes, books, shoes etc. On the other hand, perishable goods like bread, butter, vegetables, fruits etc. are all demanded by the consumers for their consumption purposes. Naturally, all these create an atmosphere to increase demand for consumer goods.

(iv) Enhance Service Diversification:

Consumers not only consume different varieties of goods, but also consume large varieties of services to maintain the standard of living. These include health service, educational service, banking and insurance service, transport and communication service, etc. Day by day the consumption of these services is rising. This will lead to expansion or enhancement of service sector within the economy.