Engel's law

Engel's law states that as household income rises, the proportion spent on food tends to fall, even if food spending rises in absolute terms.

Income elasticity of demand: The percentage change in demand for a good resulting from a one-percent change in income. Food's income elasticity below one explains why its budget share falls as income grows.
Household budget survey: A survey recording household income, spending, and related characteristics. Its expenditure data can test how food shares vary across income levels.
Ernst Engel: A German statistician who studied household budgets and formulated Engel's law. His analysis gave the relationship its name and empirical foundation.
Bennett's law: The tendency for diets to shift from starchy staples toward more varied foods as incomes rise. It concerns the composition of food consumption, whereas Engel's law concerns food's budget share.
Engel curve: A graph showing how demand for a good varies with consumer income, holding other factors constant. It represents the relationship behind Engel's law for food expenditure.
Poverty measurement: Methods for identifying and quantifying deprivation relative to a defined standard of living. Food budget shares help researchers assess material hardship and set poverty thresholds.
Household budget data: Records of household income and expenditures used to study consumption patterns. Engel inferred the food-spending relationship by comparing family budgets.
Engel coefficient: The proportion of household expenditure devoted to food. It is the measurable budget share whose decline expresses Engel's law.
Necessities: Goods whose demand rises less than proportionally as income increases. Food often behaves as a necessity, so spending grows more slowly than income.
Food demand forecasting: The estimation of future food consumption from income, prices, population, and other factors. Income growth can raise food purchases while reducing food's share of household budgets.

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Real wageRelated: Changes in real income alter how households allocate spending across necessities and other goods.