Economics • Economic BasicsMedium
What does the 'Engel's Law' state regarding household consumption expenditure patterns?
A. As household income rises, the proportion of income spent on food decreases, other things being equal.✓ Correct Answer
B. As income increases, savings decline while borrowing increases exponentially.
C. Expenditure on luxury goods remains constant regardless of income fluctuations.
D. The elasticity of demand for essential goods is always greater than unity.
💡 Solution & Explanation
Engel's Law establishes that as household income rises, the proportion of total expenditure allocated to food products decreases, even if total food spending may increase in absolute terms. This empirical microeconomic observation helps analyze shifting consumer welfare patterns across different income brackets over time.
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