Engel curves help modern economists to explore fluctuations in the value of demand depending on income.
Ernst Engel
Ernst Engel is the representative of the nation, which, according to popular belief, is considered the most meticulous and scrupulous in Europe.According to his studies, he was a statistician, economist and sociologist in part.Passion for these sciences enabled him to not only make a significant contribution to the development of statistical science, and to discover patterns of consumption, depending on the family income, which gave reason to build Engel curves.It should be noted that the Prussian scientist, occupying the post of Director of the Bureau of Statistics in Berlin, was a practitioner rather than a theorist.Therefore, the law and the Engel curve appeared empirically, as a result of prolonged detention research budgets poorer working families and representatives of the wealthier classes.Although Ernst did not use in their work schedules, yet built modern economists functions on the basis of his law became known as "Engel curve."
types of goods Engel
Exploring the costs of families with different incomes, Engel conditionally divided all products into three groups.The first he took essentials, often low-quality and cheap.With increasing income demand for these goods is falling, consumers have replaced them with more quality.The second group of goods includes goods, consumption of which does not change or increases with an increase in income.This high-quality products, all required for a normal existence, regardless of family well-being.For example, vegetables and fruits, cereals, milk and so on.The third group benefits received code name luxury goods, he took the goods, without which you can do, but at the same time they have an important status value, emphasizing the position occupied by the person or family in society.As they say, meet on clothes ...
elasticity of demand depending on the income
Thus, in determining the degree of influence of income on the demand for certain goods and services in the modern economy using Engel curves.It is the elasticity of demand for a certain product revenue.That is, we can see how changing demand for certain types of goods depending on changes in the income of consumers.Engel curve shows positive elasticity of demand with an increase in income on luxury items and negative - on low-quality goods.Distinguished quality products required for normal functioning of the family, which is very low elasticity.Due to the laws laid down, the manufacturer plans what items you need to create and what segment of the population in this count.
Curve Engel
To build Engel curve, you need to take a horizontal axis of coordinates for the welfare of the family and its consumer capacity, and vertical - by the value of the amount of purchased goods.If we are dealing with a non-elastic under the income item, ie quality essentials, the curve is quite flat.This means that the amount of product will not increase in proportion to revenue growth.After all, the family, consumes two loaves every day, will not eat more bread, even if it will increase its welfare.The index increasing budget expenditures affluent family on luxuries will grow up and quite confident.Curve substandard goods grows to a certain extent that family income does not reach the point where there will an opportunity to replace low-quality goods sturdy.Then the curve begins to fall.Thus, Engel curves show the different behavior of consumers in respect of certain types of benefits, depending on the income earned.
Value Research Engel
course, Engel's Law has its exceptions, and can not qualify for categorical conditions for any consumer.There are enough rich people who prefer to live very modestly, regardless of how much earn.Yet Engel curve shows the pattern of growth in demand for a separate type of product, depending on increases or decreases income consumers as the average value as a model of behavior for the majority.Its use allows to predict the development of various sectors of the economy and changes in demand for goods.At the same time, Engel derived a formula that determines the level of family poverty.If more than half the income of the family budget goes to food, it is safe to talk about the low level of her life.In addition, he was able to convincingly prove that the poorest families, on a daily basis caring for daily subsistence, do not spend money and effort on your own spiritual development, which greatly reduces their chances in life in general.
