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”. 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,

$C = a + b \times Y_{d}$

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

References

Arnold, Roger A. (2015). "The Consumption Function". Economics (12th ed.). Cengage Learning. pp. 259–60. ISBN 978-1-305-46545-9.

Consumer behaviour

Concepts	Consumption (economics) Consumer spending Autonomous consumption Induced consumption Consumer debt Consumer economy Consumer culture theory

Research types	Consumer behaviour Marketing research Consumer neuroscience Consumer choice Consumer product Consumer economics

Consumer attributes	Consumer confusion Consumer's risk Consumer confidence Consumer socialization Consumer ethnocentrism Cultural consumer Homo economicus Consumption function

Processes	Consumers' co-operative Consumer-to-business Factory-to-consumer Consumer service Consumerization

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