Engel's Law

Engel's law is the name that has been given to a robust relationship between income levels and expenditure on food first discovered by the German statistician Ernst Engel. In its most basic form, Engel's law states that, other things being equal, the share of the household budget spent on food will rise as household income falls. Conversely, as household income rises, a smaller relative share of the household budget will be spent on food, even as expenditure on food increases in absolute terms.

Figure 1 Engel curve

Engel's law can be expressed graphically as a curve where the level of household income is measured on the y axis and the quantity demanded of food is measured on the x axis such that it takes the form of ...