Autonomous Consumption

What is 'Autonomous Consumption'

Autonomous consumption is the minimum level of consumption that would still exist even if a consumer had absolutely no income. This contrasts with discretionary consumption, which is used for non-essential items. When combined with discretionary income, a person's autonomous consumption determines his or her real income, or real wages.

BREAKING DOWN 'Autonomous Consumption'

Certain bills and expenses are deemed to be autonomous (or independent), such as electricity, food and rent, because these expenses cannot ever be entirely eliminated whether you have money or not. Even in the worst-case financial scenario, you would still need to eat and have a place to live. If a consumer's income were to disappear for a time, he or she would have to dip into savings or increase debt in order to pay these expenses, which is also known as being in a "dissaving mode".

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  3. What is the difference between induced consumption and autonomous consumption?

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  4. How do I know how much of my income should be discretionary?

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