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

116 PART 2 • 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

5

U2

A

U1
5

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

0

10

4

8

12

16
Food (units

per month)

(a)

0

5

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.