Autonomous consumption

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Autonomous 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

• AE = Aggregate Expenditures,
• AEo = Autonomous Expenditures,
• mpc = Marginal Propensity to Consume, i.e. change in consumption/change in income,
• Y = Income.

[edit] References

1. ^ 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

• Consumption (economics)
• Consumption function

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