Indifference curves – income and demand
Shifts of income – the income-consumption line
The income-consumption line shows the relationship between income and consumption. The budget lines represent increasing levels of income and the income-consumption line connects the equilibrium points at these income levels.
In the first case, as income rises, consumption also rises, indicating a positive income elasticity which is characteristic of a normal good.
In the second next case, as income rises, consumption falls, and the income consumption line is backward bending – indicating a negative income elasticity which is characteristic of an inferior good.
Also see: Introduction to indifference curves
Indifference curves and consumer equiibrium
The laissez-faire economic theory centers on the restriction of government intervention in the economy. According to laissez-faire economics, the economy is at its strongest when the government protects individuals' rights but otherwise doesn't intervene. The ...
What Is Adverse Selection? Adverse selection is a term that describes the presence of unequal information between buyers and sellers, distorting the market and creating conditions that can lead to an economic collapse. It develops ...
Explaining The K-Shaped Economic Recovery from Covid-19 A K-shaped recovery exists post-recession where various segments of the economy recover at their own rates or levels, as opposed to a uniform recovery where each industry takes the same ...
Does Public Choice Theory Affect Economic Output? Both on paper and in real life, there is a solid relationship between economics, public choice, and politics. The economy is one of the major political arenas after all. ...
Largest Retail Bankruptcies Caused By 2020 Pandemic As we know at this point, the COVID-19 pandemic has thrown major companies in the US and the world over into complete havoc. Many have filed for bankruptcy, with an ...
Identifying Speculative Bubbles and Its Effect on Markets Speculation plays an interesting role in economics and one that drastically affects markets. If you ever see "speculation" in this context, be sure to pay attention. It is ...