Autonomous verses induced consumption

1. Quuen'sCollegeBusinessStudies2012
Keynesian
Consumption
Prepared by Timothy Durant

2. Quuen'sCollegeBusinessStudies2012
Keynesian Consumption
Function
Autonomous
Consumption
Induced
Consumption
This is the level of
consumption when
income is zero.
It has no
relationship with
income
This consumption is
based on income.
It positively related
to income.

3. Quuen'sCollegeBusinessStudies2012
Autonomous Consumption
Income = 0
Even with no income,
consumers must
consume to survive. This
consumption may be
financed by savings or
“borrowing” from a
friend.

4. Quuen'sCollegeBusinessStudies2012
Induced Consumption
Income > 0
The function includes
consumption which is
directly related to
income.
The function asserts that
consumers will spend a
portion of their income.

5. Quuen'sCollegeBusinessStudies2012
Keynesian Consumption
Function
C = a + b (Y –T)
Consumption
Autonomous
Consumption
Percentage of
income consumed
Disposable
Income