Induced consumption - Misplaced Pages

Consumption that varies with income

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Induced consumption is the portion of consumption that varies with disposable income. 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,

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

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

References

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

v t e Consumer behaviour
Concepts	Consumption Autonomous consumption Induced consumption Consumer culture theory Consumer debt Consumer economy Consumer spending
Research types	Consumer choice Consumer economics Consumer neuroscience Consumer product Marketing research
Consumer attributes	Consumer confidence Consumer confusion Consumer ethnocentrism Consumer socialization Consumer's risk Consumption function Cultural consumer Homo economicus
Processes	Consumers' co-operative Consumer-to-business Factory-to-consumer Consumer service Consumerization

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