Answer to Question #213354 in Microeconomics for Mubashir Ameenudee

Question

1) What is an income consumption curve? Is it always upward sloping?

2) What is an Engel curve? Is it always upward sloping?

Answer 1

Solution:

1.). The income consumption curve refers to a curve that displays the combinations of two products that maximizes a consumer’s satisfaction at different income levels. It can be used to derive the relationship between a consumer’s level of income and the quantity of a good purchased.

The income consumption curve is not always upward sloping. It can take numerous shapes depending on the elasticity of demand for a particular product. It can be downward sloping, backward sloping, and horizontal sloping.

 

2.). Engel curve refers to a curve that displays the relationship between the income levels and quantities demanded or purchased of particular goods when prices of the goods and consumer preferences are held constant. It is derived from the income consumption curve.

Engel curve is not always upward sloping. It can take numerous shapes depending on certain variables and consumer features, including income elasticity and whether the product is normal, luxurious, or inferior. It can take other shapes such as concave downwards, backward bending shape, forward bending shape, and vertical shape.