Income Consumption Curve Normal Good

When the income effect of both the goods represented on the two axes of the figure is positive the income consumption curve icq will slope upward to the right as in fig.

Income consumption curve normal good. At income level of 3 000 he reduces his consumption of paperbacks and increases consumption of hardcover. In this case we obtain backward to the left income consumption curve or negative sloping icc. Sometimes it is called the income offer curve or the income expansion path. Hence it is positively sloped if both goods are normal.

For example if the demand for tv increases with a rise in income then tv will be called a normal good. 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. An extreme case of engel curve is a vertical straight line as drawn in fig. It shows that he considers hardcovers to be a normal good and paperbacks to be an inferior good.

If we plot the quantity demanded on x axis and income level on y axis we get an upward sloping curve for a normal good and a downward sloping curve for an inferior good. The yellow line connecting point a point b and point c is the income consumption curve. This is the normal good case. In case of inferior goods consumption of the commodity declines as income increases.

In the first figure good x is an inferior good and good y is a normal good so with an increase in income the consumer buys fewer units of good x and more units of good y. The locus of successive optimal equilibrium points is the income consumption curve henceforth icc. Engel curve of an inferior good is drawn in figure 8 35 which is backward bending indicating a fall in the quantity purchased of the good as income increases. It can be used to create an engel curve for michael.

3 16 income of the consumer is shown on the y axis and demand for a normal good say tv is shown on the x axis. Positive sloped income consumption curve. If you income falls you might be inclined to pursue further education to increase your future income. As the consumption of both normal goods increases with the increase in income the positive relation is defined.

The slope of icc is positive in case of normal goods. For each level of income m there will. In the figure 2 to the left b1 b2 and b3 are the different budget lines and i 1 i 2 and i 3 are the indifference curves that are available to the consumer. Income effect is positive in case of normal goods.

As shown earlier as the income of the consumer rises the budget line moves outwards parallel to itself.