The graph describes the derivation of the Engel curves, i.e. the relationship
between income and quantity demanded. In the graph on the left, three budget
lines are shown as examples, representing a low, a medium and a high income.
The optimal benefit indifference curves are shown for each of these (cf. chapter
Consumer Decision). The point of contact of the indifference curve with the
respective budget line represents the optimal point of consumption. In the
graph on the right, we deduce the optimum amount of demand for each
income level. The current income level can be adjusted using the slider.
The red dot in the left graph shows the respective optimum consumption
point. In the right graph, the corresponding point is presented in the
income-quantity-diagram. For a low income almost all goods are normal
goods, i.e. with increasing income the quantity demanded also increases.
Intuitively, this can be explained as follows: The higher income allows to spend
additional money (at least partially) on the good and thereby increase
benefit. Above a certain level of income, however, the good is increasingly
replaced by a higher-value one. Then, the demand decreases with increasing
income: the good is inferior. A typical example of the change from a normal
good to an inferior good is simple rye bread. Above a certain income, this
staple is more and more replaced by alternatives such as bread rolls or