Consumer income
Topic: Consumer Behaviour, Demand and Elasticity · NCERT: Class 9, Ch 9 "The Price Puzzle: What Drives the Market"
Meaning
Consumer income is the money income a household has to spend. It is a key determinant of demand. When income rises and prices stay the same, the demand curve for a normal good shifts right (more is bought at every price). The demand curve for an inferior good shifts left (less is bought). So a rise in income does not always raise demand.
Example
When a household's income rises, it buys more milk, eggs and packaged food, which are normal goods. It buys less coarse grain or cheap cloth, which are inferior goods for it.
Don't confuse with
- Purchasing power: consumer income is the money a household earns. Purchasing power is what that money can actually buy. A price fall raises purchasing power even if income stays the same.
- Movement along the demand curve: a change in income shifts the whole curve. It does not cause a movement along it.
Related concepts
- Determinants of demand
- Related goods
- Substitute goods
- Complementary goods
- Purchasing power
- Future price expectations
- Population size and composition
- Shift in demand curve
- Movement along the demand curve