Engel's Law: UPSC Notes

Engel's Law: UPSC Notes Introduction Engel's Law is an economic principle proposed by the German statistician Ernst Engel in 1857. It states that as household income increases, the proportion of income spent on food decreases, even if the absolute expenditure on food rises. This principle is widely used in understanding consumption patterns, income distribution, and economic development. Key Features of Engel's Law Food Expenditure and Income Relationship : With an increase in income, the percentage of income allocated to food decreases. Absolute spending on food may increase, but its share in the total budget shrinks. Non-Food Expenditures : As income increases, the proportion spent on non-food items (e.g., housing, education, healthcare, and luxury goods) increases. Application to Economic Growth : Engel’s Law reflects economic development, where higher income levels shift consumption towards non-essential and higher-value goods. Implications of Engel's Law Economic Development : Dev…