Engel's law

Engel's law

Engel's law is an observation in economics stating that, with a given set of tastes and preferences, as income rises, the "proportion" of income spent on food falls, even if "actual" expenditure on food rises. In other words, the income elasticity of demand of food is less than 1.

The law was named after the statistician Ernst Engel (1821–1896).

Engel's Law doesn't imply that food spending remains unchanged as income increases: It suggests that consumers increase their expenditures for food products (in % terms) less than their increases in income. ["... je aermer eine Familie ist, einen desto groesseren Antheil von der Gesamtausgabe muss zur Beschaffung der Nahrung aufgewendet werden ..." (Ernst Engel 1857, 2. edition, 1896b, s.28-29).]

Engel's Law states that household expenditures on food in the aggregate decline as income rise; in other words, the income elasticity of demand for food in the aggregate is less than one a decline toward zero with income growth. [See C.P. Timmer, W.P Falcon, and SR Pearson, Food policy Analysis (Baltimore : Johns Hopkins University Press, 1983, page 43)]

References

See also

* Engel curve


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