Question

Engel’s Laws state that

Answer 1

Engel's Law states that as the income of the person increases the proportion of it spend on food tends to decrease and proportion spend on other goods increases(luxury). It implies that the income elasticity of food is less than one and greater than zero.

For example, Let's assume that income of the person is $100, at this income person is spending $25 on food that about 25 % on food. Now as the income of the person increases to $200, at this income person will spend $40 on food that is about 20 % of its total income.