Autonomous consumption (also exogenous consumption, autonomous spending) is the consumption expenditure that occurs when income levels are zero. Such consumption is considered autonomous of income only when expenditure on these
consumables
Consumables (also known as consumable goods, non-durable goods, or soft goods) are goods that are intended to be consumed. People have, for example, always consumed food and water. Consumables are in contrast to durable goods. Disposable product ...
does not vary with changes in income; generally, it may be required to fund necessities and debt obligations. If income levels are actually zero, this consumption counts as
dissaving, because it is financed by
borrowing or using up
savings
Wealth is the abundance of valuable financial assets or physical possessions which can be converted into a form that can be used for transactions. This includes the core meaning as held in the originating Old English word , which is from an ...
. Autonomous consumption contrasts with
induced consumption
Induced consumption is the portion of Consumption (economics), consumption that varies with Disposable and discretionary income, disposable income. When a change in disposable income “induces” a change in consumption on goods and services, th ...
, in that it does not systematically fluctuate with income, whereas induced consumption does.
The two are related, for all households, through the
consumption function
In economics, the consumption function describes a relationship between consumption and disposable income. The concept is believed to have been introduced into macroeconomics by John Maynard Keynes in 1936, who used it to develop the notion of ...
:
:
where
* ''C'' = total consumption,
* ''c
0'' = autonomous consumption (''c
0'' > 0),
* ''c
1'' = the
marginal propensity to consume
In economics, the marginal propensity to consume (MPC) is a metric that quantifies induced consumption, the concept that the increase in personal consumer spending ( consumption) occurs with an increase in disposable income (income after taxes a ...
(the gradient of induced consumption) (0 < ''c
1'' < 1), and
* ''Y
d'' = disposable income (income after government taxes, benefits, and transfer payments).
See also
*
Consumption (economics)
Consumption refers to the use of resources to fulfill present needs and desires. It is seen in contrast to investing, which is spending for acquisition of ''future'' income. Consumption is a major concept in economics and is also studied in man ...
*
Consumption function
In economics, the consumption function describes a relationship between consumption and disposable income. The concept is believed to have been introduced into macroeconomics by John Maynard Keynes in 1936, who used it to develop the notion of ...
*
Dissaving
References
Consumption (macroeconomics)
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