income expansion path

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A graph (with the axes representing the quantities of two goods) showing how income is divided between different uses, for example importables and exportables, as its total level rises. With unit income elasticity of demand for each, the income expansion path is a ray through the origin; if consumption is biased towards importables as income rises, the income expansion path has a slope between the unit-elasticity ray and the importables axis.

Subjects: Economics.

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