Definition of 'Engel's Law'
Engel's law was first proposed by the German economist Ernst Engel in 1857. Engel based his law on observations of the spending habits of different income groups in Germany. He found that the proportion of income spent on food decreased as income increased, and that the proportion of income spent on other goods and services increased.
Engel's law has been supported by subsequent studies in other countries. However, there are some exceptions to the law. For example, in some countries, the proportion of income spent on food may increase as income increases, due to the high cost of food.
Engel's law is important because it helps to explain how people's spending habits change as their incomes change. This information can be used by businesses to target their marketing efforts and by governments to design social programs.
In addition to the original Engel's law, there are also a number of other related laws that describe how people's spending habits change as their incomes change. These laws include:
* The Law of Diminishing Marginal Utility: This law states that as a person consumes more of a good or service, the marginal utility (the additional satisfaction that the person gets from consuming one more unit of the good or service) decreases.
* The Law of Demand: This law states that as the price of a good or service increases, the quantity demanded of the good or service decreases.
* The Law of Supply: This law states that as the price of a good or service increases, the quantity supplied of the good or service increases.
These laws are all important for understanding how people's spending habits change and how the economy works.
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