Income Consumption Curve Is A Vertical Line

Also the price effect for x 2 is positive while it is negative for x 1.

Income consumption curve is a vertical line. If good y happens to be an inferior good and income consumption curve will bend towards x axis as shown by icc in fig. Joe s income consumption curve for tea is a vertical line on an optimal choice diagram with tea on the horizontal axis and other goods on the vertical axis. An extreme case of engel curve is a vertical straight line as drawn in fig. When there is an increase in the income then the budget line of the.

Every time the money income of the consumer increases his budget line shifts to the right. It is plotted by connecting the points at which budget line corresponding to each income level touches the relevant highest indifference curve. B when the price of tea drops from 9 to 8 per pound the change in joe s. In figure 3 the income consumption curve bends back on itself as with an increase income the consumer demands more of x 2 and less of x 1.

In indifference curve map income consumption curve is the locus of the equilibrium quantities consumed by an individual at different levels of his income. It shows how the consumer s purchases vary with his income. This enables him to move to higher and higher indifference curves and choose a new optimum bundle of x 1 and x 2 the locus of successive optimal equilibrium points is the income consumption curve henceforth icc. It means that he has spent ay 1 of money on the good x and has obtained ox 1 of.

A show that joe s demand curve for tea must be downward sloping. Other articles where income consumption curve is discussed. May be called the income consumption curve. At this price i e with price line ab the consumer is in equilibrium at point q 1 on indifference curve ic 1 and is buying ox 1 of good x.

The figure first shows that the neutral good is measured on x axis or in our case good x is neutral good. The slope of the price line ab i e oa ob will give the price of good x. 8 31 and 8 32 various possible shapes which income consumption curve can take are shown bereft of indifference curves and budget lines which yield them. Income consumption curve is a graph of combinations of two goods that maximize a consumer s satisfaction at different income levels.

Thus in this equilibrium position he is having combination of ox 1 of good x and oy 1 of money. This represents the case of a neutral commodity which is quite unresponsive to the increase in income. Normally the curve will have a positive slope as ee does in figure 5a meaning that as a person grows wealthier he will buy more of each commodity.