Economics, 3rd Edition

Where Pizza is an Inferior Good 

Figure 5.19 shows a situation where as a result of the increase in 

income, represented by a shift of the budget constraint from BC

1

 to BC

2,

 there is a change in the consumer 

optimum from point A to point B. The income expansion path indicates that as income rises, demand for 

cola increases (it is a normal good) but the demand for pizza has decreased indicating that it is an inferior 

good. In this case the substitution effect on pizza of the rise in income has outweighed the income effect.