Autonomous consumption
Topic: Aggregate Demand, Income Determination and the Multiplier · NCERT: Class 12, Ch 4 "Determination of Income and Employment"
Meaning
Autonomous consumption is the part of consumption that does not depend on income. It is written as C̄ in the consumption function C = C̄ + cY. It takes place even when income is zero, because people must still buy food and other basic needs. At zero income, people pay for this through dissaving (using up past savings) or by borrowing. On a graph, C̄ is the intercept, the point where the consumption line meets the vertical axis.
Example
In NCERT's imaginary country Imagenia, C = 100 + 0.8Y. Even if income falls to zero, people still consume ₹100, so autonomous consumption is ₹100.
Don't confuse with
- Induced consumption: this is the part that changes with income (cY). Autonomous consumption stays fixed whatever the income level.
- Autonomous investment: this is also independent of income, but it is spending by firms on capital and inventories, not spending by households on consumption.
Related concepts
- Consumption function
- Induced consumption
- Marginal propensity to consume
- Marginal propensity to save
- Average propensity to consume
- Average propensity to save
- Savings