Autonomous Consumption

Introduction

Sometimes, some types of consumption cannot be avoided because they are the needs, not wants. People often have to make consumptions that are needed for living and they do so without considering income. Such consumptions are always in demand whether the availability is enough or not.

Definition: Autonomous Consumption

Autonomous consumptions are consumptions that must be made irrespective of income levels. These type of consumptions are extremely necessary for life and they must be consumed by borrowing money or spending money from savings.

For example, food and energy must be consumed even if the income of a person is zero. These are known as autonomous consumption.

In simpler words, autonomous consumption is consumption made when there is no disposable income in the hands of the individuals. Most autonomous consumption items are day-to-day necessities that do not fall under the luxury goods category. As the consumption of autonomous goods is unavoidable (needs) there is always a certain demand for the products that fall under the autonomous consumption category.

Autonomous consumption is the opposite of induced consumption where purchases of luxury goods are made with disposable income. It is also different from discretionary consumption where the items are not quite essential (wants) but are desirable for the consumers.

If people do not have income or when there is no saving to expense for autonomous consumption, people may have to incur debt for autonomous consumption. Therefore, autonomous consumption is a central need for human beings regardless of the income they have.

The goods and services that fall under the autonomous consumption category are usually controlled by the government. For example, shelter, healthcare, and utilities are often subsidized by the governments in order to make them affordable for everyone. Autonomous consumption expenditures often do not vary with income too.

Example of Autonomous Consumption

As mentioned above, examples of autonomous consumption are many because they are needs not wants. Food, shelter, clothing, education, and healthcare are some examples of autonomous consumption. There is always a certain demand for autonomous consumption goods in the market. So, the governments make sure that there is no black-marketing of autonomous consumption goods if the scarcity of these goods hit the economy.

It must be noted that autonomous consumption and induced consumption may coincide in various instances. For example, people can have luxurious food items on their menu at home. However, people who cannot afford such luxury must also have food items that are priced at lower levels.

How Does Autonomous Consumption Work?

Members of the economy usually need to avail the goods and services that constitute autonomous consumption. The government, therefore, is interested to keep the supply of such goods intact and sufficient. However, in times of famine and war, there may be a scarcity in the availability of goods and services, therefore, increasing the load to make the availability normal.

• Autonomous consumption patterns are often dynamic and they may shift from one form to the other depending on various factors.

  For example, the autonomous consumption nature may shift due to changes in income. If a person loses his job, the food consumption patterns may change as the income of the individual goes down. The same may apply if the wages are reduced for a certain reason. So, when the sources of income are limited or eliminated, the autonomous consumption patterns may change.

• The financial options available in the hands of the individuals also impact the autonomous consumption nature.

  For example, when credit facilities are reduced by increasing interest rates, people may choose to buy less of consumption items that are costly.

• Autonomous consumption is also disrupted by economic conditions, such as inflation and recession. In both cases, the demand goes down leading to less expenditure which may limit autonomous consumption to a large extent.

• Lifestyle and personal choices may also impact autonomous consumption.

  For example, a change in eating habits may lead to a change in autonomous consumption patterns. The same is true when the use of utilities is changed. In other words, the nature of consumption patterns is in the hands of the individuals and they may dictate the terms as and when necessary.

Effects of Autonomous Consumption

Autonomous consumption may have huge impacts in the economy and life in general. Some of the key ones are mentioned below.

Autonomous consumption may disrupt demands in market

A shift in autonomous consumption may disrupt the demands in the market. As individuals shift their habits from one product to another, there is a shift in demand in the market. This helps the individuals to opt for items of better quality.

Autonomous consumption gives rise to competition

Autonomous consumption also gives rise to competition. As consumers shift their focus from inferior items to better ones, the producers who provide better quality get an opportunity to grab the market share.

Autonomous consumption at times may lead to discretionary expenses

Sometimes, autonomous expenses may lead to discretionary expenses. As people get exposed to the opportunities of products available in the market, they may buy products that are desirable even if it is not necessary. This may mean extra pressure on the shoulders of individuals in times of hardship.

Autonomous consumption leads to less purchasing power and dissaving

Autonomous consumption may lead to dissaving too. When there is an increase in autonomous spending, people may have to spend money from their savings which may lead to less availability of money in their hands. This may curtail demands and lead to less purchasing power among individuals.

Autonomous consumption may exert pressure on the government

Autonomous consumption may exert pressure on the government because they may have to feel the burden of managing the demands when the economy is in a phase of weakening. Raising demands and lack of availability may also lead to an unstable environment in the economy.

Conclusion

Autonomous consumption is a key matter of concern for economists and governments as this is a mandatory requirement of the economy. Autonomous consumption is unavoidable and all concerned authorities must stay vigilant in an economy to keep the supply of autonomous consumption goods normal. As these goods are often needed en masse, there may be opportunists who look for hoarding to increase the profit from the trade of these goods.

Autonomous consumption is often prioritized over induced consumption because it is related to a larger group of the population. Moreover, autonomous consumption is a matter of more concern to the poor and resource-deprived too. As these sections of people are very vulnerable, the governments often control the supply of autonomous consumption goods so that they may reach such populations.

FAQs

1. What is the difference between autonomous consumption and discretionary consumption?

Ans. The difference is that autonomous consumption is mandatory while discretionary consumption is dependent on will. As autonomous consumption goods are needs that cannot be avoided, it is differentiated from discretionary products that are wants but not extremely necessary for a living.

2. Why is autonomous consumption more relevant to poor and developing nations?

Ans. The poor and developing economies must manage the autonomous consumption of goods so that the population can have the basic necessities to live life. These goods are unavoidable to make a living and hence the governments must pay attention to make them available.

On the other hand, the developed nations have less poverty which means that autonomous consumption is less important a concern for them.