Autonomous consumption
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Autonomous consumption (also exogenous consumption) is a term used to describe consumption expenditure that occurs when income levels are zero. Such consumption is considered autonomous of income only when expenditure on these consumables does not vary with changes in income. If income levels are actually zero, this consumption counts as dissaving, because it is financed by borrowing or using up savings.
Autonomous consumption is, by definition, the opposite of induced consumption.
Autonomous expenditures are those that do not systematically fluctuate with income, whereas induced expenditures change in relation to income.[1] The two are related in the Consumption function:
AE = AEο +mpcY where
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- AE = Aggregate Expenditures,
- AEo = Autonomous Expenditures,
- mpc = Marginal Propensity to Consume, i.e. change in consumption/change in disposable income,
- Y = Income.
[edit] References
- ^ Colander, David C. (2004). Macroeconomics (Fifth edition ed.). Boston, MA: McGraw-Hill/Irwin. pp. G–1 & G–4 (Glossary). ISBN 0-07-255119-4.
[edit] See also
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Autonomous Demand (term used in economics)is when a particular commodity is demanded for its own sake it is known as autonomous demand. Demand for house is an example for autonomous demand.
