Autonomous Consumption - Explained
What is Autonomous Consumption?
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What is Autonomous Consumption?
Autonomous consumption refers to the lowest level of consumption that must occur even in the absence of disposable income for consumers.
Back to: ECONOMIC ANALYSIS & MONETARY POLICY
Why is Autonomous Consumption Important?
Autonomous consumption is understood as consumption that happens even when one's income level is zero. As such, autonomous expenditures are only for basic necessities. Discretionary consumption is the opposite of autonomous consumption where a consumer is at will to choose to buy important items or not.
Even more of an Explanation of Autonomous Consumption
There are some expenses or consumptions that are considered autonomous because they are basic necessities of life, and a consumer must have them.
- For instance, food items, house rents, electricity and water bills, and clothing are autonomous consumptions that are not dependent on the income of the consumer.
Autonomous consumptions may be smaller in size or scope as a result of the lack of available resources, but they must still be purchased.
- For instance, an individual can move to a smaller apartment, change eating patterns, limit the use of electricity and other utilities to reduce the cost of autonomous consumption.
Autonomous consumptions are generally financed through savings or debt, known as "dissaving" or "negative saving". While dissaving is commonly associated with the presence of financial distress or hardship, there are some exceptions.
- For instance, an individual can voluntarily use his net assets to fund autonomous expenses.
Autonomous spending is a key component of government expenditure, such as the provision of social amenities, health infrastructure, community facilities, developmental programs, and others. Discretionary spending is another type of government expenditure which includes the purchase of non-essential items, such as programs and projects that are not considered essential to a particular community.
- Total utility
- Marginal Utility
- Diminishing Marginal Utility
- Marginal Utility per Dollar
- Rule of Maximizing Utility
- Consumer Goods
- Changes in Income Affect Consumer Choices
- Changes in Price Affect Consumer Choices
- Substitution Effect
- Income Effect
- Budget Constraints Create Demand Curves
- Lifecycle Model of Consumption
- Autonomous Consumption
- Permanent Income Hypothesis
- Lipstick Effect
- Engel's Law
- Paradox of Thrift
- Ricardo Barro Effect
- Consumer Confidence Index
- The Wealth Effect
- Behavioral Economics