Induced consumption

Consumption that varies with income

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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]

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

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

## See also

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* Lifestyle creep
* Diderot effect
* Induced demand

## References

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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.

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Consumer behaviour

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* Consumption
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* Induced consumption
* Consumer culture theory
* Consumer debt
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Research types|

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Consumer attributes|

* Consumer confidence
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* Consumer's risk
* Consumption function
* Cultural consumer
* Homo economicus

Processes|

* Consumers' co-operative
* Consumer-to-business
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* Consumerization

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