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