induced consumption

{{Short description|Consumption that varies with income}}

{{More citations needed|date=December 2009}}

Induced consumption is the portion of consumption that varies with disposable income.{{Cite web |title=The Difference Between Induced Consumption and Autonomous Consumption |url=https://www.investopedia.com/ask/answers/061615/what-difference-between-induced-consumption-and-autonomous-consumption.asp |access-date=2023-10-25 |website=Investopedia |language=en}} 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,{{cite book |last=Arnold |first=Roger A. |chapter=The Consumption Function |title=Economics |publisher=Cengage Learning |edition=12th |year=2015 |pages=259–60 |isbn=978-1-305-46545-9 |chapter-url=https://books.google.com/books?id=hTdBBAAAQBAJ&pg=PA259 }}

$C\; =\; a\; +\; b\; \backslash times\; Y\_\{d\}$

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