Price-consumption curve – Curve tracing the utility-maximizing combinations of two goods as the price of one changes.
Individual demand curve – Curve relating the quantity of a good that a single consumer will buy to its price. This curve has to important properties:
- The level of utility that can be attained changes as we move along the curve
- At every point on the demand curve, the consumer is maximizing utility by satisfying the condition that the marginal rate of substitution (MRS) of good X for good Y equals the ratio of the prices of good X and good Y.
Income-consumption curve – Curve tracing the utility-maximizing combinations of two goods as a consumer’s income changes.
**Normal goods are those, which consumers want to buy more of them as their income increases. Inferior are those, which the consumption falls when the consumer’s income increases (the income-consumption curve bends backwards as the income increases).
Engel curve – Curve relating the quantity of a good consumed to income.
