engel curve

engel curve - 7.b The Engel Curve: The Engel Curve tracks...

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7.b The Engel Curve: The Engel Curve tracks the consumption of a Good X as an individual’s income changes. Income is plotted on the x-axis and the quantity of Good X consumed is plotted on the y-axis. The curve that follows the amount of Good X consumed as income increases plots the Engel Curve. The slope of the Engel Curve also tells us whether or not the good is a normal good or inferior good. If the slope of the curve is positive, the good is a normal good because consumption increases as income is increased. If the slope of the curve is negative, the good is an inferior good because consumption decreases as income is increased. The Engel Curve can be derived from the Income Expansion Path. Each budget constraint in the Income Expansion Path provides the income. The amounts of Good X consumed at the points of consumers’ optimum on the budget constraint provide the quantity of Good X consumed at those income levels. Figure 7.b.1:
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This note was uploaded on 05/05/2010 for the course ECON 303 taught by Professor Cheng during the Spring '07 term at USC.

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engel curve - 7.b The Engel Curve: The Engel Curve tracks...

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