how to draw a diagram of Icc when both x and y are normal goods
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With a given money income to spend on goods, given prices of the two goods and given an indifference map (which portrays given tastes and preferences of the consumers), the consumer will be in equilibrium at a point in an indifference map.
We are interested in knowing how the consumer will react in regard to his purchases of the goods when his money income changes, prices of the goods and his tastes and preferences remaining unchanged.
Income effect shows this reaction of the consumer. Thus, the income effect means the change in consumer’s purchases of the goods as a result of a change in his money income. Income effect is illustrated in Fig. 8.28.
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