Induced consumption

Induced consumption is the part of consumption that changes with disposable income. It is when there is a change in disposable income “induces” (persuades or makes someone want to do something) a change in consumption on goods and services. In contrast, spending for autonomous consumption do not change with income. For example, spending 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 $Y_{d}$ shows disposable income. $b$ 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.

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Concepts	Consumption Autonomous consumption Induced consumption Consumer culture theory Consumer debt Consumer economy Consumer spending
Research types	Consumer behaviour Consumer choice Consumer economics Consumer neuroscience Consumer product Marketing research
Consumer attributes	Consumer confidence Consumer confusion Consumer ethnocentrism Consumer socialization Consumer's risk Consumption function Cultural consumer Homo economicus
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Induced consumption

References

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