Induced consumption

This article needs additional citations for verification. Please help improve this article by adding citations to reliable sources. Unsourced material may be challenged and removed. Find sources: "Induced consumption" – news · newspapers · books · scholar · JSTOR (December 2009) (Learn how and when to remove this message)

Induced consumption is the portion of consumption that varies with disposable income.^[1] When a change in disposable income “induces” a change in consumption on goods and services, then that changed consumption is called “induced consumption”. In contrast, expenditures for autonomous consumption do not vary with income. For instance, expenditure on a consumable that is considered a normal good would be considered to be induced.

In the simple linear consumption function,^[2]

${\displaystyle C=a+b\times Y_{d}}$

induced consumption is represented by the term ${\displaystyle b\times Y_{d}}$, where ${\displaystyle Y_{d}}$ denotes disposable income and ${\displaystyle b}$ is called the marginal propensity to consume.

1. ^ "The Difference Between Induced Consumption and Autonomous Consumption". Investopedia. Retrieved 2023-10-25.
2. ^ Arnold, Roger A. (2015). "The Consumption Function". Economics (12th ed.). Cengage Learning. pp. 259–60. ISBN 978-1-305-46545-9.

This economics-related article is a stub. You can help Wikipedia by expanding it.

• v
• t
• e