Definition Autonomous Consumption: This is the level of consumption which does not depend on income. The argument is that even with zero income you still need to buy enough food to eat, through borrowing or running down savings.
Autonomous Consumption in the Keynesian Model
In the Keynesian model of Aggregate Expenditure, autonomous consumption plays an important role.
C = a +bY. In this formula a is the level of autonomous consumption, where b is the marginal propensity to consume out of income.
What Determines Autonomous Consumption?
the level of autonomous consumption depends upon:
- Assets such as houses
- Expectations of future income
- Difficulty of borrowing money
- Minimum standards of living and ideas of absolute poverty