Slope Of Income Consumption Curve For An Inferior Good Is

At income level of 3 000 he reduces his consumption of paperbacks and increases consumption of hardcover.

Slope of income consumption curve for an inferior good is. The consumer maximizes his utility at points x and x and by joining these points the income consumption curve can be obtained. When income increases to oy2 the demand has increased from oq1 to oq2. The yellow line connecting point a point b and point c is the income consumption curve. It implies that the consumption of inferior goods declines with the increase in income and the inverse relation is defined.

Inferior goods when the income consumption curve has a negative slope. The quantity demanded decreases with income the income elasticity of demand is negative the good is an inferior good. For each level of income m there will be some optimal choice for each of the goods. The slope of the icc is negative in the case of inferior goods.

This signifies that good y is an inferior good because beyond point q 2 income effect is negative for good y and as a result its quantity demanded falls as income increases. In fig 8 30 income consumption curve icc slopes downward to the right beyond point q 2 bends towards the x axis. Hence it is negatively sloped if any or both of the goods are inferior goods. It shows that he considers hardcovers to be a normal good and paperbacks to be an inferior good.

It can be stated that an increase in income will lead a consumer to find its equilibrium on a higher indifference curve and vice versa product prices remaining the same. Income demand curve for inferior goods. In the case of inferior goods income demand curve sloped downwards from left to right. It leads to a rightward shift in the demand curve of inferior good from dd to d 1 d 1.

Here we are considering good x as inferior with normal good x and similarly good x is normal good with inferior good y. Negative sloped income consumption curve. Sometimes it is called the income offer curve or the income expansion path. It can be used to create an engel curve for michael.

The locus of successive optimal equilibrium points is the income consumption curve henceforth icc. This is termed as an income effect. As a result of income effect consumption of superior goods will rise while that of the inferior goods will fall. In the case of an inferior good there is a negative effect of income and as a result the income consumption curve icc will become backward bending or negative in slope.

As income decreases the demand for inferior goods say black and white tv rises from oq to oq 1 at the same price of op. This implies that good x 1 is an inferior good as the demand for x 1 fell with an increase in the income of the consumer. 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.