Engel curve

Leser is best known for his work on the Engel curve.

For normal goods, the Engel curve has a positive gradient.

The shape of Engel curves depend on many demographic variables and other consumer characteristics.

This homogeneity condition is trivial, as otherwise would not give linear Engel curves.

In order to be consistent with the standard model of utility-maximization, Engel curves must possess certain properties.

Engel curves are also of great relevance in the measurement of inflation and tax policy.

Alternatively, Engel curves can also describe how real expenditure varies with household income.

Engel curve and other demand function models still fail to explain most of the observed variation in individual consumption behavior.

He argued that the demand of any commodity came to stagnate and frequently decline as Engel curve shows it.

Also, since this change does not depend on variables particular to any individual, the slopes of the Engel curves of different individuals are equal.

Empirical Engel curves are close to linear for some goods, and highly nonlinear for others.

No established theory exists that can explain the observed shape of Engel curves and their associated income elasticity values.

An Engel curve describes how household expenditure on a particular good or service varies with household income.

In microeconomics, an Engel curve shows how the quantity demanded of a good or service changes as the consumer's income level changes.

With all prices held constant, the Engel curve can be defined as a graph depicting the demand for one good as a function of income.

A good's Engel curve reflects its income elasticity and indicates whether the good is an inferior, normal, or luxury good.

Graphically, the Engel curve is represented in the first-quadrant of the Cartesian coordinate system.

As for indirect taxation, estimated Engel curves relate the expenditure of groups of households on taxed goods to total expenditure.

Although the Engel curve remains upward sloping in both cases, it bends toward the y-axis for necessities and towards the x-axis for luxury goods.

Engel curves have also been used to study how the changing industrial composition of growing economies are linked to the changes in the composition of household demand.

Ernst Engel himself argued that households possessed a hierarchy of wants that determined the shape of Engel curves.

For goods with Marshallian demand function generated from a utility function of Gorman polar form, the Engel curve has a constant slope.

In microeconomics Engel curves are used for equivalence scale calculations and related welfare comparisons, and determine properties of demand systems such as aggregability and rank.

For instance it satisfies the axioms of choice, aggregates over consumers without invoking parallel linear Engel curves, is consistent with budget constraints, and is simple to estimate.

Heteroscedasticity is a well known problem in the Estimation of Engel curves: as income rises the difference between actual observation and the estimated expenditure level tends to increase dramatically.