Income Consumption Curve In Economics

If both x 1 and x 2 are normal goods the icc will be upward sloping i e will have a positive slope as shown in fig.

Income consumption curve in economics. Income consumption curve traces out the income effect on the quantity consumed of the goods. Income effect can either be positive or negative. The locus of successive optimal equilibrium points is the income consumption curve henceforth icc. Income effect for a good is said to be positive when with the increase in income of the consumer his consumption of the good also increases.

This is the normal good case. Income effect can either be positive or negative. The income effect in economics can be defined as the change in consumption resulting from a change in real income. Income consumption curve is thus the locus of equilibrium points at various levels of consumer s income.

This income change can come from one of two sources. From external sources or from income being freed. It is plotted by connecting the points at which budget line corresponding to each income level touches the relevant highest indifference curve. Sometimes it is called the income offer curve or the income expansion path.

If now various points q 1 q 2 q 3 and q 4 showing consumer s equilibrium at various levels of income are connected together we will get what is called income consumption curve icc. In economics and particularly in consumer choice theory the income consumption curve is a curve in a graph in which the quantities of two goods are plotted on the two axes. Income consumption curve traces out the income effect on the quantity consumed of the goods.