(8th edition) (the pearson series in economics) robert pindyck, daniel rubinfeld microecon 141

116 PART • Producers, Consumers, and Competitive Markets 15 Steak (units per month) F IGURE 4.3 Income-Consumption Curve C 10 AN INFERIOR GOOD An increase in a person’s income can lead to less consumption of one of the two goods being purchased Here, hamburger, though a normal good between A and B, becomes an inferior good when the income-consumption curve bends backward between B and C U3 B U2 A U1 10 20 30 Hamburger (units per month) Figure 4.3 shows the income-consumption curve for an inferior good For relatively low levels of income, both hamburger and steak are normal goods As income rises, however, the income-consumption curve bends backward (from point B to C) This shift occurs because hamburger has become an inferior good—its consumption has fallen as income has increased Engel Curves Income-consumption curves can be used to construct Engel curves, which relate the quantity of a good consumed to an individual’s income Figure 4.4 shows how such curves are constructed for two different goods Figure 4.4 (a), which shows • Engel curve Curve relating the quantity of a good consumed to income Income (dollars per month) Income (dollars per 30 month) 30 Engel Curve 20 Inferior 20 Normal 10 10 12 16 Food (units per month) (a) 10 Hamburger (units per month) (b) F IGURE 4.4 ENGEL CURVES Engel curves relate the quantity of a good consumed to income In (a), food is a normal good and the Engel curve is upward sloping In (b), however, hamburger is a normal good for income less than $20 per month and an inferior good for income greater than $20 per month