Economics, 3rd Edition

Engel curve

. The Engel curve is a line showing the relationship between demand and 

levels of income.

Engel curve 

a line showing the relationship between demand and levels of income

In this example the increase in demand for luxuries is greater between income levels Y

2

 and Y

3

 than it 

was between Y

1

 and Y

2

 suggesting that the income elasticity of demand is getting greater as income rises. 

However, we can see that the proportionate increase in quantity demanded of luxuries between Y

1

 and Y

2

 

is less than the proportionate increase in income, which suggests that the demand for luxuries is income 

inelastic between these income levels.

The Engel Curve

The upper graph shows the income-consumption curve for two 

goods, food and luxuries, which are both normal goods. The 

lower graph plots the change in demand for luxuries against 

changes in income.