Normal goods Income–consumption curve

figure 2: income-consumption curve normal goods

in figure 2 left, b1, b2 , b3 different budget lines , i, , indifference curves available consumer. shown earlier, income of consumer rises, budget line moves outwards parallel itself. in case, initial bundle x, increase in income of consumer budget line moves b1 b2 , consumer choose x bundle , subsequently, further rise in consumer s income budget line moves b2 b3 , consumer choose x bundle , on. consumer maximize utility @ points x, x , x, , joining these points, income-consumption curve can obtained.

the upward sloping income-consumption curve implies there increase in demand both x , x income of consumer rises , cause demand curves of goods shift right.

when income-consumption curve has positive slope income elasticity of demand positive. greater shifts of demand curve right, greater income-elasticity of demand. in such case, goods normal goods.