1. Lectures in Microeconomics-Charles W. Upton
Engel Curves
Lectures in Microeconomics-Charles W. Upton

2. Demand and income If your income is initially X1, you buy A1 apples X2
Engel Curves

3. Demand and income If your income is initially X1, you buy A1 apples
When your income rises to X2, you buy A2 apples.
To make the obvious point, demand is a function of income X2 X1 I2 I1 A1 A2
Engel Curves

4. How demand rises with income
Lets plot the combinations of apples and income (X) from the previous graph. A2 A1 X1 X2
Engel Curves

5. How demand rises with income
Lets plot the combinations of apples and income (X) from the previous graph.
Connecting all possible points, we get the Engel curve, giving demand as a function of income. A2 A1 X1 X2
Engel Curves

6. The Shape of the Engel Curve
The shape of the Engel Curve gives us the income elasticity of demand for the good
If the Engel Curve is a straight line, the income elasticity is 1.0 X
Engel Curves

7. The Shape of the Engel Curve
The shape of the Engel Curve gives us the income elasticity of demand for the good
If the Engel Curve has increasing slope the elasticity is greater than 1.0 X
Engel Curves

8. The Shape of the Engel Curve
The shape of the Engel Curve gives us the income elasticity of demand for the good
If the Engel Curve has decreasing slope the elasticity is less than 1.0 X
Engel Curves

9. The Shape of the Engel Curve
The shape of the Engel Curve gives us the income elasticity of demand for the good
This Engel Curve corresponds to a good that is both inferior and superior, depending on income X
Engel Curves

10. This is how we drew the Engel Curve
A Qualification A
This is how we drew the Engel Curve X
Engel Curves

11. A Qualification This is how we drew the Engel Curve
Usually people flip the axes X
Engel Curves

12. A Qualification This is how we drew the Engel CurveX
This is how we drew the Engel Curve
Usually people flip the axes
And end up with this A
Engel Curves

13. End
©2006 Charles W. Upton
Engel Curves