Income demand denotes the relationship between income and quantity demanded of a commodity. It shows the changes in quantity demanded of a commodity due to the changes in income. Income and demand are directly related to each other. Normally people demand more quantity of different commodities when their income increase.The income demand curve slopes upwards from left to right. But income demand is not same in the case of all commodities.
The income demand for superior goods increases with an increase in the income of the people. When income of the people increases, they buy superior goods and avoid the purchase of inferior goods. As a result, the demand for inferior goods fall due to an increase in income. The income demand curve for superior goods slopes upwards. As against this the demand for inferior goods slopes downwards. These two income demand curves are show as follows:
Income demand curve for superior goods: In the diagram, quantity demanded of a commodity and the income of the consumers are shown on the OX and OY axes respectively.
DD is the income demand curve for superior goods. At Oy1 income, demand is Oq1. When income increases to Oy2, the demand has increased from Oq1 to Oq2. Thus, income demand curve for superior goods slopes upwards from left to right.
Income demand curve for inferior goods: In the case of inferior goods, income demand curve sloped downwards from left to right. An increase in income leads to a decrease in demand for inferior goods. This is shown with the help of the following diagram:
