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,
formula_1
induced consumption is represented by the term formula_2, where formula_3 shows disposable income. formula_4 is called the marginal propensity to consume.