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explain the concept of income consumption curve

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explain the concept of income consumption curve
Answered Same Day Dec 22, 2021

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Robert answered on Dec 22 2021
137 Votes
Explain the concept of income consumption curve
Answer:
Income consumption curve is also called income offer curve and it is the locus of all optimal
consumption points resulting from change in income, keeping price level constant. The optimal
consumption point is determined at a point where budget line is tangent on indifference curve.
For a normal good, the income offer curve would be upward sloping but for an inferior good, it
would be downward sloping curve.
In case of normal good: suppose good x and good y are normal goods and the initial consumer
equili
ium is at point E1 [defined by tangency between budget line (BC1) and indifference
curve (IC1)]. Now suppose there is rise in income of the consumer. The rise in income would be
denoted by outward shift in budget line (BC1 to...
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