Copyright © 1995-2004 OnLineTexts.com, Inc. - All Rights Reserved
As income increases the budget constraint shifts out. Consumers
will increase consumption of normal goods and decrease consumption
of inferior goods.
In the graph to the right, we show a consumer
for whom dining out is a normal good but for whom movies are
an inferior good. The red line shows the path of movie and dining
consumption as income increases. It is quite common for both goods
to be normal but it would be strange for them both to be inferior.
Copyright © 1995-2004 OnLineTexts.com, Inc. - All Rights Reserved