Income Offer Curves and Engel Curves

We have seen that an increase in income corresponds to shifting the budget line outward in a parallel manner. We can connect together the demanded bundles that we get as we shift the budget line outward to construct the income offer curve. This curve illustrates the bundles of goods that are demanded at the different levels of income, as depicted in Figure 6.3A. The income offer curve is also known as the income expansion path. If both goods are normal goods, then the income expansion path will have a positive slope, as depicted in Figure 6.3A.

For each level of income, m, there will be some optimal choice for each of the goods. Let us focus on good 1 and consider the optimal choice at each set of prices and income, Xi(pi,p2,m). This is simply the demand function for good 1. If we hold the prices of goods 1 and 2 fixed and look at how demand changes as we change income, we generate a curve known as the Engel curve. The Engel curve is a graph of the demand for one of the goods as a function of income, with all prices being held constant. For an example of an Engel curve, see Figure 6.3B.

Microeconomics Graphs

An inferior good. Good 1 is an inferior good, which means that the demand for it decreases when income increases.

Engels Curve

How demand changes as income changes. The income offer curve (or income expansion path) shown in panel A depicts the optimal choice at different levels of income and constant prices. When we plot the optimal choice of good 1 against income, m, we get the Engel curve, depicted in panel B.

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Responses

  • tim
    What is income offer curve and engel curve?
    8 years ago
  • HALFRED
    How to plot an income offer curve?
    8 years ago
  • medhanie
    Where to plot optimal choice on graph?
    7 years ago
  • awate
    What are price offer curves in micro economics?
    4 years ago
  • Poppy
    How income offer curve related to engel curve?
    4 years ago
  • cruz
    What is Engle curve in economics?
    4 years ago
  • Silke
    What is an incomeoffer curve?
    3 years ago
  • rita
    What is the relationship between demand and offer curve?
    3 years ago
  • Aleksi
    What is income offer curves?
    3 years ago
  • ARTTU
    What is difference between income offer curve and engles curve?
    3 years ago
  • louise
    WHAT IS THE DIFFERENT BETWEENINCOME AFTER CURVE AND ENGLES CURVE?
    3 years ago
  • NANCY MOORE
    What is the slope of income offer curve?
    3 years ago
  • NICOLA
    What is the dufferebce b/ n price offer curve engel curve?
    2 years ago
  • Donata
    What is Economics concept of income offer curve?
    2 years ago
  • Sonja Pohjamo
    How u derive income offer curve and engle curve due to change in income?
    2 years ago
  • david
    What is offer curve in microeconomics?
    2 years ago
  • seppo
    How to draw an engel curve?
    2 years ago
  • sheryl
    What is incomer offer curve and engel curve for diagram?
    2 years ago
  • Gustava Rossi
    How to drive income offer curve?
    2 years ago
  • ellis
    What is the definition of income offer curve?
    2 years ago
  • SOFIA RYYN
    What is income offercurve and engle curve?
    2 years ago
  • Valentin
    What is income offer curve of an inferior good?
    2 years ago
  • sisko
    Is an income offer curve always curved?
    1 year ago
  • harry m
    How to determine income offer curve?
    1 year ago
  • johanna
    How to calculate income offer curves?
    8 months ago
  • THERESA BARRETT
    How to calculate the price offer curve?
    2 months ago
  • Joel Koivula
    How to find income offer curve?
    2 months ago

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