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 × Y d {\displaystyle C=a+b\times Y_{d}}
induced consumption is represented by the term b × Y d {\displaystyle b\times Y_{d}} , where Y d {\displaystyle Y_{d}} denotes disposable income and b {\displaystyle b} is called the marginal propensity to consume.
See also Lifestyle creep Diderot effect Induced demand
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