Price Consumption Curve

Price Consumption Curve (PCC) can be defined as the locus of combination of different goods X and good Y so that there is change in quantity consumption due to change in commodities prices. It shows price effect or total effect. PCC refers to the locus of combination of two goods that shows the change in position of consumer or change in equilibria due to price change.

Price Demand Relationship: Normal Goods

• For normal goods, price and demand moves in the opposite direction and follows the law of demand.


• When price of normal good decreases, the quantity demanded for it increases and vice-versa.

Nature of PCC and Demand Curve for Normal Goods

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Price Demand Relationship: Inferior Goods

• When price of an inferior good falls, its negative income effect will tend to reduce the quantity purchased, while the substitution effect will tend to increase the quantity purchased.


• However, in case of Inferior goods, substitution effect is greater than income effect, so the PCC curve is straight upward sloped.

Nature of PCC and Demand Curve for Inferior Goods

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Price Demand Relationship: Giffen Good

• In case of Giffen goods, there is clear violation of law of demand as the price of two goods increases (one being normal and other being giffen), the demand for giffen good increases and vice versa.


• When price of a giffen good (highly inferior) falls, its negative income effect will tend to reduce the quantity purchased, while the substitution effect will tend to increase the quantity purchased.


• However, in case of giffen goods, substitution effect is less than income effect, so the PCC curve is downward sloped.

Nature of PCC and Demand Curve for Giffen Goods

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