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Difference between Induced Investment and Autonomous Investment

Induced Investment and Autonomous Investment are two types of investment expenditure.

What is Induced Investment?

The investment which depends upon the profit expectations and has a direct influence of income level on it is known as Induced Investment. Induced Investment is income elastic. It means that the induced investment increases when income increases and vice-versa.

What is Autonomous Investment?

The investment on which the change in income level does not have any effect and is induced only by profit motive is known as Autonomous Investment. Autonomous Investment is income inelastic. It means that if there is a change in income (increase/decrease), the autonomous investment will remain the same. In general, autonomous investments are made by the Government in infrastructural activities.

Difference between Induced Investment and Autonomous Investment

Basis

Induced Investment

Autonomous Investment

Meaning

It is the investment that depends upon the profit expectations and has a direct influence on income level on it. It is the investment on which the change in income level does not have any effect and is induced only by profit motive.

Motive

The motive behind induced investment is profit. It means that it depends on profit expectations. The motive behind autonomous investment is social welfare.

Income Elasticity

Induced Investment is income elastic. It means that the induced investment increases when income increases and vice-versa. Autonomous Investment is income inelastic. It means that if there is a change in income (increase/decrease), the autonomous investment will remain the same.

Investment Curve

As induced investment is income elastic, its curve slopes upwards. As autonomous investment is income inelastic, its curve is parallel to X-axis.

Sector

In general, induced investment is done by the private sector. In general, autonomous investment is done by the government sector.

Relation with National Income

Induced Investment is positively related to national income. Autonomous Investment is unrelated to national income.
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