Engel's law


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Engel's law

a principle that states that consumers will tend to spend an increasing proportion of any additional income upon LUXURY GOODS and a smaller proportion on STAPLE GOODS, so that a rise in income will lower the overall share of consumer expenditures spent on staple goods (such as basic foodstuffs) and increase the share of consumer expenditures on luxury goods (such as motor cars). See INFERIOR PRODUCTS, INCOME ELASTICITY OF DEMAND, INCOME CONSUMPTION CURVE, AGRICULTURAL POLICY.
References in periodicals archive ?
As one would expect, food and necessities dominate spending where average incomes are low, and it's an observed fact that the proportion of household income spent on food falls with rising incomes (economists call it Engel's law, for the German statistician who first documented it).
"Using Engel's Law to Estimate CPI Bias." American Economic Review, 91(3), 2001b, 619-30.
Engel's Law Suggests Not in Norway." Scandinavian Journal of Economics, 109(1), 2007, 177-95.
expects population growth to continue slowing, global affluence to increase at around 1.5 percent per year, people to spend a smaller share of their incomes on food as their incomes rise (a phenomenon known as Engel's Law), and the amount of crop per hectare to rise by 2 percent annually.
One is inevitable trend of economic development which requires a high growth rate of nonagricultural sectors than agricultural dictated by Engel's law. The Engel's law states that as personal disposable income grows as a result of economic development, consumer tends to spend a lower proportion of incremental income on agricultural products.
The article begins with two key economic concepts used in the analysis, Engel's law and the Engel curve, followed by the literature review on the applications of these concepts to services in general, and to telecommunications services in particular.
The secondary literature provides four further arguments for the potential importance of manufacturing: economies of scale, technological progress, linkage effects and Engel's law.
The leading example is Engel's law: as incomes rise, the share of expenditures that go toward food tends to diminish.
This proposition was so well established that it became known as "Engel's Law." The demand for food products, therefore, increases proportionately with population, but increases more slowly than does per-capita income.
Engel's law, Hoffmann's law, the substitution elasticities between leather footwear and substitutes, Chandler's continuous flow production techniques theory, management styles or simply an in-depth understanding of the mechanization process and the barriers it faced in Spain could have enhanced this study considerably.
While the findings of the paper support the validity of Engel's Law, the estimates presented indicate that expenditure elasticities for different commodity groups vary with income and, in general, exhibit a cyclical pattern, which is explained in terms of quantitative as well as qualitative changes in the households' consumption basket.
Engel's law is confirmed through the decline in the marginal spending on Food and Drinks from nearly 0.35 in 1966-67 to 0.28 in 1984-85.