Answer to Question #236883 in Microeconomics for OK MOLEFE

Question

 It is observed that initially, increases in income cause the consumption of hamburgers to rise, but as the income continues to rise, the consumption of hamburgers starts to decline. What is the reason for this?

Also, illustrate in diagrams.

Answer 1

When people gain income at first, they usually have some small money to buy the hamburger. This is based on the idea that previously they never had extra income to purchase it. However, when income increases people tend to discover substitutes to hamburger which they prefer more than the product making its consumption to decline.