Engel's law

by zeyang wu

The mid-nineteenth century, the German economist and statistician Engel on consumption of different income households in Belgium conducted a survey to study the effect of increasing income on consumption expenditure components of demand, put forward the theory with regularity; thereby Engel's Law is named. Engel’s law is the proportion of total food expenditure in the total consumption of individual consumption.

The less a family income, household income used to buy food, the greater the proportion of expenditure, with the increase in household income the proportion of household income used to buy food spending will fall. By extension, a poorer the country, the average income for every citizen of the proportion of expenditure on food, the greater, with the rich countries, the percentage decline.

Engel's law is expressed primarily food expenditure to total expenditure ratio varies with changes in income certain trend. It reveals the relationship between household income and food expenditure, the total consumption expenditure, with the proportion of food expenditure to illustrate the economic development income increased degree of influence on life consumption. As we all know, eating is the first need of human existence, at lower income levels, which inevitably plays an important role in consumer spending. As income increases, in the case of food to meet the basic needs of the consumer focus will begin to wear, use and other aspects of the transfer. Thus, the greater the Engel coefficient of a country or family life more poverty; on the contrary, the Engel coefficient is smaller, more affluent life.

Engel coefficient of 59% or more for the poor, 50-59% of normal, well-off 40-50%, 30-40% for the wealthy, less than 30% for the richest.

resource:
Carle C. Zimmerman, "Ernst Engel's Law of Expenditures for Food," Quarterly Journal of Economics, Vol. 47, No. 1, , p. 80.November 1932. book. Mar. 2016