The relationship between the level of income and the quantity purchased of a commodity is called:

Question

Accepted Answer

The correct option is 4:
The curve that illustrates the relationship between a consumer's income level and the quantity of a specific good or service they purchase is known as the Engel curve. Developed by German statistician Ernst Engel, this curve plots the quantity consumed of a good on the x-axis and the consumer's income on the y-axis (or sometimes vice-versa). For normal goods, the Engel curve slopes upward, indicating that as income increases, the quantity demanded also increases. Conversely, for inferior goods, the curve bends backward, showing that consumers buy less of that commodity as their income rises. Therefore, the Engel curve is the specific tool used in economics to map the income-demand connection.

The incorrect option is 1:
The Demand curve graphically represents the relationship between the price of a good and the quantity demanded of that good, assuming all other factors (including income) remain constant. It typically slopes downward from left to right, illustrating the law of demand.

The incorrect option is 2:
The Price consumption curve (PCC) shows how a consumer's optimal consumption bundle changes as the price of one of the goods changes, holding income and the price of the other good constant. It maps out equilibrium points resulting from various price changes, not income changes.

The incorrect option is 3:
The Laffer curve is a concept from supply-side economics that relates tax rates to the amount of tax revenue collected by the government. It suggests that tax revenue may decrease if tax rates are excessively high, as it focuses on public finance and macroeconomics, not individual consumer income and quantity demanded.