Income Changes and Engel Curves

Sliding the budget out

The Engel curve

Budget shares along the way

Reading the offer curve backward

For u equal to x1 x2 with prices 1 and 1, what does the income offer curve look like?

A good's Engel curve at fixed prices slopes downward. What is the good and what does its budget share do?

What property of the Engel curves marks homothetic preferences?

Engel's law says the food share of expenditure falls as income rises. In the language of this lesson, food is what?

For u equal to x1 x2 with prices 2 and 1, compute x1 at income 100, and write the number.

Same consumer, income doubles to 200, compute the new x1, and write the number.

For u of x1 x2 with prices 2 and 1, what does the income offer curve look like as income grows?

At income 100 the optimum of u of x1 x2 with prices 2 and 1 is (25, 50). What happens at income 200?

Along the Engel path of u of x1 x2 with prices 2 and 1, what happens to budget shares?

A household's food share falls from 40 percent to 25 percent as income grows. What does Engel's law call food?

For u of x1 x2 with prices 2 and 1 and income 100, compute x2 at the optimum, and write the number.

Same consumer and prices, at income 200 the optimum is (50, 100). Compute the utility, and write the number.