Engel's law states that income elasticities are
A) negative for normal goods
B) positive for inferior goods
C) higher for food in industrialized nations than in nonindustrialized nations
D) less than one for food
E) usually about equal to one

Question

Quizplus · Accepted Answer

Engel's law posits that as income rises, the proportion of income spent on food falls, even if absolute expenditure on food rises. This implies that the income elasticity of demand for food is less than one, meaning that food is a necessity good whose consumption increases less proportionately than income.

Engel's Law States That Income Elasticities Are