Fisheries Economics

2.2.12 Engel's law

Consumption is a function of income. Among others, income and standard of living influence demand for a commodity. The Engels of law of consumption, postulated by Dr. Ernest Engels in 1857, explains consumption pattern with reference to income.

According to the Engel’s law, as the family income increases, (i) the percentage expenditure on food and other necessaries decreases, (ii) the percentage expenditure remains almost constant in the case of clothing, fuel and light and (iii) the percentage expenditure on comforts and luxuries such as education, health, recreation, tends to increase.

The law explains that rich people will be spending smaller percentage of their income on necessaries of life, while they spend larger percentage on comforts and luxuries. The key word in the law is percentage expenditure and not the absolute expenditure. A rich man may be spending a large amount of money on food compared to a poor man ( in absolute terms). But, this will form a small proportion of his income (in percentage terms), as his income will be very large. On the other hand, a poor man with small income may have to spend a larger proportion of it for food.