Question

Difference between autonomous consumption and induced consumption

Answer 1

$\bf\underline{Autonomous \:Consumption :-}$

▪Autonomous consumption is the consumption which take place at the zero level of income.

▪Autonomous consumption is not dependent on income thus it is income free.

▪It increases even when income decreases.

▪It is the consumption which is essential for living conditions.

▪For example, an unemployed person needs food to consume at the zero level of income.

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$\bf\underline{Induced \:Consumption :-}$

▪Induced consumption is the consumption which take place only at the surplus level of income.

▪It is totally dependent on income thus it is income oriented.

▪It increases when income increases.

▪It is the consumption which is not essential for living conditions but it increases the luxury level.

▪For example, an employed person needs vehicle to travel to avail its services when he is earning surplus income.

Answer 2

Answer:

Autonomous consumption:

Autonomous consumption refers to expenditure taking place when disposable incomes level are at zero. These causes consumers to borrow money or withdraw from saving accounts.

Induced consumption :

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.