Question

Income elasticity of giffen goods on engle curve

Answer 1

An Engel curve describes how household expenditure on a particular good or service varies with household income. There are two varieties of Engel curves. Budget share Engel curves describe how the proportion of household income spent on a good varies with income.

A good's Engel curve reflects its income elasticity and indicates whether the good is an inferior, normal, or luxury good. For normal goods, the Engel curve has a positive gradient. That is, as income increases, the quantity demanded increases.