Upward Sloping Income Consumption Curve

Pictured below is the curve for a normal good.

Upward sloping income consumption curve. The saving curve ss shows the gap be tween consumption curve cc and the income curve oz in the upper panel of fig. The income consumption curve is the set of optimal bundles when income changes while preferences and prices of goods are kept constant. An increase or decrease in taxation. Changes in income can be the result of many factors including.

But upward sloping income consumption curves to the right for various goods may be of different slopes as shown in fig. Be yond income level oy 1 there is positive. The income consumption curve in this case is negatively sloped and the income elasticity of demand will be negative. When the price of commodity changes for which the demand is inelastic the pcc so drawn is upward sloping.

If income effect is positive for both the goods x and y the income consumption curve will slope upward to the right as in fig. But downward sloping is one possible shape of price consumption curve. This file is licensed under the creative commons attribution share alike 3 0 unported license. Upward sloping pcc.

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. It will be seen that up to in come level oy 1 consumption exceeds income that is there is dissaving. Shifting of the consumption curve. The icc for an inferior good bends backwards.

18 april 2013 21 39 41. A graph describing an income consumption curve for normal goods. The slope of the price consumption curve generally slopes upward to the right indicating the increase in the purchase of a commodity as the price of that commodity reduces. When consumption and savings priorities change.

Let s consider that both of the goods x and y are normal good and see the effect of change in income on the consumption decision with the help of the following diagram. Price consumption curve can have other shapes also. 6 6 we have drawn the sav ing curve ss in the panel at the bottom. Also the price effect for x 2 is positive while it is negative for x 1.

Vandhana297 original whitetimberwolf svg version licensing. 8 31 in which income consumption curves with varying slopes are all sloping. The income consumption curve icc is upward sloping for normal goods. The engel curve graphs the relationship between purchasing good x and.

Upward sloping price consumption curve for x means that when the price of good x falls the quantity demanded of both goods x and y rises.