Question

Explain what is meant by autonomous consumption.

Answer 1

Autonomous consumption refers to the compulsory minimum expenditure incurred which is independent of income, so it is income inelastic. This expenditure does not depend on an individual's income. For e.g., even if a person is unemployed his income being zero, he will have to spend minimum amount on food, water, cloth etc., without which he cannot survive. Autonomous consumption expenditure is always positive. It can never be zero, since even at zero income level some minimum consumption expenditure is incurred for survival by the households by either using past savings or by borrowings.