<p>I cannot see any way to have negative autonomous consumption. I believe autonomous consumption's extreme is zero if there's a kind of superheroes who don't need water, electricity and food to live and they save everything they earn. But in a case like this, there's  no reason for having aggregate supply at all as nobody will buy the goods in first place.</p>

CC BY-SA 3.0
2017-01-28T12:24:37.803Z
Yes, you are right. It doesn't seem like a plausible case in reality but like a few hypothetical cases if we consider hypothetically, autonomous consumption was ever negative how could it impact the equilibrium?
SDM
CC BY-SA 3.0
2017-01-28T12:34:31.540Z
Also, when we talk about autonomous consumption we are assuming that the consumer s are borrowing to carry on their consumption and since it's a static model, can we assume that the consumers are lending at that particular time and thus, autonomous consumption is negative?
SDM
CC BY-SA 3.0
2017-01-29T00:26:36.023Z
I suppose we talk about Aggregate Demand/Supply Equilibrium. In this case, $AD=C+I+G+NX$. If the economy is closed we just remove $NX$ from the formula. The autonomous consumption is just the constant term of $C$. If the constant decreases, then $AD$ shifts to the left (just look it mathematically since everything is linear).
Commissar Vasili Karlovic
CC BY-SA 3.0
2017-01-29T00:36:15.940Z
If your economy is closed, the aggregate borrowing cannot exceed savings in first place. However, if your economy is open and you borrow to consume, then $MPC$ and/or $Y_d$ will increase, not autonomous consumption. Check https://en.wikipedia.org/wiki/Autonomous_consumption
Commissar Vasili Karlovic
CC BY-SA 4.0
2021-12-13T13:39:15.683Z
Even at an autonomous consumption of zero, it would be difficult to make any simulations, unless you have government money to compensate.
Alexandre Michaud
CC BY-SA 3.0
2017-01-28T08:48:40.790Z
2017-01-28T08:48:40.790Z
Commissar Vasili Karlovic
<ol>
<li><p>Consumption cannot be negative because of how it is defined. Consumption <a href="https://www.thebalance.com/components-of-gdp-explanation-formula-and-chart-3306015" rel="nofollow noreferrer">measures people's spending</a> on goods or services. Spending, like weight or distance cannot be negative.</p>
</li>
<li><p>If we forget about point 1 just as a thought experiment, the effect of negative <span class="math-container">$a_0$</span> on output would be just:</p>
</li>
</ol>
<p><span class="math-container">$$\frac{dY}{da_0 }= M\cdot\frac{da_0}{dt}$$</span></p>
<p>where <span class="math-container">$M$</span> is the multiplier (in most 101 textbook <span class="math-container">$M= \frac{1}{1-MPC}$</span> - where MPC is the marginal propensity to consume).</p>
<p>So if <span class="math-container">$a_0$</span> falls by 1% the output falls by <span class="math-container">$M\%$</span>.</p>
<p>If <span class="math-container">$a_0$</span> would be sufficiently small it could even make output negative - but again that is nonsesical. Output, consumption, investment and government spending cannot be negative.</p>

CC BY-SA 4.0
2021-12-17T11:53:43.527Z
2021-12-17T11:53:43.527Z
csilvia
<p>When determining equilibrium, we take consumption equal to:</p>
<p><span class="math-container">\begin{equation*}
C =a_{0} +a_{1} YD
\end{equation*}</span></p>
<p>where <span class="math-container">$\displaystyle a_{0}$</span> is the autonomous consumption or minimum consumption that would take place even in absence of income.
What could be the consequences on equilibrium income if the autonomous consumption <span class="math-container">$\displaystyle a_{0}$</span> was negative?</p>

CC BY-SA 4.0
2021-12-18T14:19:54.223Z
Side note: equations like this one are usually fitted to current levels of consumption and income (i.e. trillions of dollars). In such a regression it is possible for the intercept to be negative, but no one expects that to hold true if income theoretically fell to zero.
Daniel
<macroeconomics><keynesian-economics>
Simple Keynesian model of income determination
SDM
# Simple Keynesian model of income determination

(Asked by: username_0 on 2017-01-28)

When determining equilibrium, we take consumption equal to:

\begin{equation\*}
C =a\_{0} +a\_{1} YD
\end{equation\*}

where $\displaystyle a\_{0}$ is the autonomous consumption or minimum consumption that would take place even in absence of income.
What could be the consequences on equilibrium income if the autonomous consumption $\displaystyle a\_{0}$ was negative?

**Tags:** macroeconomics, keynesian-economics

> **Comments:**
> **username_1**: Side note: equations like this one are usually fitted to current levels of consumption and income (i.e. trillions of dollars). In such a regression it is possible for the intercept to be negative, but no one expects that to hold true if income theoretically fell to zero.  

---

## 2 answers

### Answer by username_2 on 2017-01-28. Score: 2

I cannot see any way to have negative autonomous consumption. I believe autonomous consumption's extreme is zero if there's a kind of superheroes who don't need water, electricity and food to live and they save everything they earn. But in a case like this, there's no reason for having aggregate supply at all as nobody will buy the goods in first place.

> **Comments:**
> **username_0**: Yes, you are right. It doesn't seem like a plausible case in reality but like a few hypothetical cases if we consider hypothetically, autonomous consumption was ever negative how could it impact the equilibrium?  
> **username_0**: Also, when we talk about autonomous consumption we are assuming that the consumer s are borrowing to carry on their consumption and since it's a static model, can we assume that the consumers are lending at that particular time and thus, autonomous consumption is negative?  
> **username_2**: I suppose we talk about Aggregate Demand/Supply Equilibrium. In this case, $AD=C+I+G+NX$. If the economy is closed we just remove $NX$ from the formula. The autonomous consumption is just the constant term of $C$. If the constant decreases, then $AD$ shifts to the left (just look it mathematically since everything is linear).  
> **username_2**: If your economy is closed, the aggregate borrowing cannot exceed savings in first place. However, if your economy is open and you borrow to consume, then $MPC$ and/or $Y_d$ will increase, not autonomous consumption. Check https://en.wikipedia.org/wiki/Autonomous_consumption  
> **username_3**: Even at an autonomous consumption of zero, it would be difficult to make any simulations, unless you have government money to compensate.  

---

### Answer by username_4 on 2021-12-17. Score: 0

1. Consumption cannot be negative because of how it is defined. Consumption [measures people's spending](https://www.thebalance.com/components-of-gdp-explanation-formula-and-chart-3306015) on goods or services. Spending, like weight or distance cannot be negative.
2. If we forget about point 1 just as a thought experiment, the effect of negative $a\_0$ on output would be just:

$$\frac{dY}{da\_0 }= M\cdot\frac{da\_0}{dt}$$

where $M$ is the multiplier (in most 101 textbook $M= \frac{1}{1-MPC}$ - where MPC is the marginal propensity to consume).

So if $a\_0$ falls by 1% the output falls by $M\%$.

If $a\_0$ would be sufficiently small it could even make output negative - but again that is nonsesical. Output, consumption, investment and government spending cannot be negative.


---

