In the 19th century, German statistian Engel made a regular change in the consumption structure in the 19th century: the ratio of the expenditure of a family income (or total expenditure), the larger the proportion of expenditures used to buy food, With the increase of household income, expenditures in home income (or total expenditures) used to purchase food will decline. It is broadcasted, the poorer in a country, the larger the proportion of each national income (or average expenditure) is used to purchase food, the larger, with the prosperity of the country, this proportion declines. Engel's formula: Food spending changes percentage of food expenditure to total expenditures (R1) = ─────────────────────────────────ace; | ───────── Percentage of income
R2 is also known as the income elasticity of food expenditure.
Engel Law is proposed according to experience data. It is only possible to assume that all other variables are the constant. Therefore, when investigating the changes in the proportion of food expenditures, the degree, food should also be considered. Factors such as processing, food industry and food itself will affect the increase in food expenditure of the family. Only the further increase in income does not have an important impact on food expenditure when it reaches a high level of consumption level.
The Engel coefficient is based on the ratio of Engel's law, which is an indicator of the high life level. Its calculation formula is as follows: The amount of food expenditure Engel coefficient = ───────G total spending amount
Except for food expenditures, the expenditures such as clothing, housing, daily necessities, etc., also in the growing household income or total expenditure, the proportion increased in a period of reducing trend.
