In this article we will discuss about the properties of an income consumption curve in different situations, with the help of suitable diagrams. With a given money income to spend on goods, given prices of the two goods and given an indifference map (which portrays given tastes and preferences of the consumers), the consumer will be in equilibrium at, point [...]
Income consumption curve is the locus, in indifference curve map, of the equilibrium quantities consumed by an individual at different levels of his income. Thus, the income consumption curve (ICC) can be used to derive the relationship between the level of consumer's income and the quantity purchased of a commodity by him. A nineteenth century German statistician Ernet Engel (1821-1896) [...]
We will now explain how the consumer reacts to charges in the price of a good, his money income, tastes and prices of other goods remaining the same. Price effect shows this reaction of the consumer and measures the full effect of the change in the price of a good on the quantity purchased since no compensating variation in income [...]