Our economic activity is a vast, complex web of exchanges of money for goods and services. These exchanges can be divided into two types:

• exchanges that form part of the process of producing products that are sold to make a profit;
• exchanges by individual persons to obtain those products, individual persons who will use the products for their own purpose (that is, not as part of their livelihood).

The first type of exchange is called intermediate consumption. The second type of exchange is called final consumption. In mainstream economics, and in common use in the news media and in general discussion, the term consumption refers only to the second type of consumption: final consumption.  The ultimate outcome of an economy is the final consumption of its products: goods and services.

Only the purchase of goods and services by an individual person, who will use them for their own purposes (that is, not as part of their livelihood), is consumption. The individual person, who performs that purchase and use, is a consumer.

Purchasing products for the purpose of then selling them to someone else to make a profit, or using them to produce other products to be sold to someone else is not consumption; it is intermediate consumption, and is part of the production and distribution stages of the economic process.

If a person buys timber, door handles, nails, and a hammer and saw, with the intention of making a chest-of-drawers to sell, none of those purchases are consumption (they are intermediate consumption.) If another person then buys that chest-of-drawers solely to keep their clothes in (rather than buy it to sell it to someone else for a profit), that purchase is consumption.

If a business person buys a filing cabinet to store their businesses tax records in, that purchase is not consumption, because the filing cabinet is used as part of the process of that business making money (it's intermediate consumption.) If a person buys a filing cabinet to store their personal records in, that purchase is consumption.

This page is linked from:

how resources are used in economic activities 

why the economy is consumption

goods and services

the economic process

measuring an economy

decoupling with a service economy

what the economy is

human population

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