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Figure 5.2 Consumer’s Response to an Increase in Income When One Good Is Inferior
When a good is inferior, an increase in a consumer’s income decreases the consumer’s consumption of that good. Here, mac and cheese is an inferior good, while steak is a normal good. When the consumer’s income increases, shifting the budget constraint outward from BC1 to BC2, she consumes less mac and cheese and more steak at the optimal consumption bundle. From initial optimal consumption bundle A to her new optimal consumption bundle B, the quantity of mac and cheese consumed decreases from Qm to Qm while her consumption of the normal good steak increases from Qs to Qs.