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 ?
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.
In his findings, Engel's law applied to food, but not to telecommunications services.
The graphical analysis shows clearly that Engel's law applies to the six selected countries (Figure 1).
The secondary literature provides four further arguments for the potential importance of manufacturing: economies of scale, technological progress, linkage effects and Engel's law.
Klein ([1983] 1997: 10) counts Engel's law as one of the few laws of economics that have "stood the test of time.
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.
2) The main objective of these studies has been to estimate and test the validity of the relationship between income and expenditure on different commodities, as summarized by Engel's law.
To test the validity of Engel's law, the choice of an appropriate functional form has been a matter of great interest.
Engel's law is confirmed through the decline in the marginal spending on Food and Drinks from nearly 0.
The results verify Engel's law of a decline in marginal food expenditures as income rises, and a constancy in marginal expenditures on clothing, footwear and fuel and lighting.