Autonomous consumption is the portion of consumption spending that does not depend on current income. In the simplest Keynesian consumption function, it is the intercept term.
Consumption function
A standard Keynesian specification is:
[ C = a + bY ]
where (a) is autonomous consumption and (b) is the marginal propensity to consume (MPC).
In many textbook models, the relevant income concept is disposable income (Y_d):
[ C = a + bY_d ]
Economic Interpretation
The idea is not that people literally consume with no resources. Rather, (a) captures spending financed by:
- wealth (running down assets),
- borrowing,
- or other income sources not explicitly modeled.
It also captures baseline consumption needs and institutional features (credit access, social insurance) that make consumption less sensitive to current income in the short run.
Why It Matters In Macroeconomics
In Keynesian models, a higher (a) raises aggregate demand at any given level of income, which affects equilibrium output. Changes in autonomous consumption can therefore act like demand shocks, and the size of (b) helps determine the multiplier effects of those shocks.
Practical Example
If a household loses income temporarily but keeps paying rent and groceries by drawing down savings or using credit, their consumption does not fall one-for-one with income. In a consumption-function model, that behavior shows up as higher autonomous consumption (or a higher MPC over the relevant range).