Your income response for bicycle riding changes with the amount of income you earn. At low levels of income, you view bicycle riding as an inferior good and substitute other types of transportation (e.g., auto travel) as your income rises. However, you view bicycle riding as a normal good after your income rises above a particular level. What shape does your Engel curve for bicycle riding have?

Question

Quizplus · Accepted Answer

The Engel curve for bicycle riding would have a C-shape because initially as income increases, demand for bicycle riding decreases (inferior good), but eventually demand for bicycle riding will increase (normal good) as income continues to rise.

Your Income Response for Bicycle Riding Changes with the Amount