Engel Curve | What do you mean by Engel curve? | Cardinal Utility Approach | Microeconomics | Management Notes

An Engel curve is a curve that shows the optimum quantity of a commodity purchased at different levels of income. In other words, Engel’s curve indicates how much quantity of a commodity a consumer will consume at different levels of his income in order to be in equilibrium.

Derivation of Engel Curve

An Engel curve is a curve that shows the optimum quantity of a commodity purchased at a different level of income. In other words, Engel’s curve indicates how mud), the quantity of a commodity a consumer with consume at different levels of his income in order to be in equilibrium. Engel’s curve can be drawn with the help of the income cons curve.

 

In the given figure A, apples are shown on X-axis and oranges on Y-axis, whereas in figure  B, apples are shown on X-axis and income on Y-axis. The initial budget line of the consumer is MN where E is the equilibrium position of the consumer. When income increases, the budget line shifts from MN to M1N1′ where the equilibrium position of the consumer is point increase in income of the consumer shifts the budget line from 2N2, and the equilibrium point is E2. Joining these points E, El we get income Consumption Curve (ICC). Corresponding to these of income, three perpendiculars have been drawn on the X-axis of panel B in e.

Point A shows that an income level of the consumer purchases °Xi units of apples. At an income level of 12, OX2 apples are purchased as shown by point B. Similarly, C with an income level of 13, OX3 apples is purchased. By joining points A, B, C, we get a curve E’E’ known as Engel’s Curve, which shows equilibrium quantities of apples purchased at different levels of income.

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