In what follows we explain how an Engel curve is derived from income consumption curve. The curve showing the relationship between the levels of income and quantity purchased of particular commodities has therefore been called Engel curve. However, both types of relations convey the same information about individual’s consumption behaviour as in our analysis of Engel’s curve the prices of goods are held constant. Though Engel dealt with the relationship between income and expenditure on different goods, in order to keep our analysis simple we will describe and explain the relationship between income and quantities purchased of goods. This change in the pattern of consumption expenditure (that is, decline in the proportion of income spent on food and other necessities and increase in the proportion of income spent on luxuries) with the rise in income of the families has been called Engel’s law. ![]() ![]() ![]() In other words, the poor families spend a relatively large proportion of their income on necessaries, whereas rich families spend a relatively a large part of their income on luxuries.
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