Autonomous Consumption
Candlefocus EditorNecessities like groceries, electricity, and education are examples of autonomous consumption. Although it is possible for people to forgo these items as well, in most cases some sort of basic consumption will remain necessary regardless of disposable income or wage levels.
When people are forced to spend their disposable income on necessities, they are no longer able to invest the money which may have been used to purchase products or services that would have created economic growth. This loss of investment is one reason why recessionary periods can be so hard to escape.
In terms of macroeconomics, autonomous consumption determines the absolute minimum needed to maintain economic stability. Even in the midst of economic difficulties, there will always be autonomous consumption that fuels the system. This means that when economic downturns occur, the amount of aggregate demand needed to stimulate the economy will be lower than it would normally be.
Because autonomous consumption is a necessary part of the economy, it can be used as an indicator of overall economic health. If the amount of autonomous consumption is rising, this could be a sign of prosperity, whereas if the amount of autonomous consumption is decreasing, it can be a sign of an impending recession.
All in all, autonomous consumption is essential to the economic health of consumers and the economy as a whole. It is the foundation of economic stability and creates the foundation for economic growth. Without the savings and spending associated with autonomous consumption, economies around the world would grind to a halt. That’s why it’s important to pay attention to autonomous consumption statistics when trying to gauge the state of the economy.