Which of the following correctly describes an income-consumption curve?
A)It identifies consumer responses to decreases in prices which increase his or her real income.
B)It identifies the rate at which a consumer is able to substitute one good for another as income changes.
C)It identifies how a consumer's consumption pattern changes as real income changes while prices are constant.
D)It identifies the income effect of price changes.

Question

Quizplus · Accepted Answer

An income-consumption curve shows how a consumer's consumption pattern changes as real income changes while prices are constant. It is typically drawn with the quantity of one good on the x-axis and the quantity of another good on the y-axis, and it shows how much of each good the consumer will purchase at different levels of income. The curve slopes upward because as income increases, the consumer can afford to buy more of both goods.

Which of the Following Correctly Describes an Income-Consumption Curve