| Consider the following regarding the concept of Engel's law: |
| 1. It states that as income rises, the proportion of income spent on food falls, |
| 2. According to this law, smaller a person's income, the greater the proportion of it that he will spend on food and vice versa. Choose the correct one: |
A) Only 1
B) Only 2
C) Both 1 and 2
D) neither 1 nor 2
Correct Answer: C
Solution :
[c] Engel's law is an observation in economics stating that as income rises, the proportion of income spent on food falls, even if actual expenditure on food rises. In other words, the income elasticity of demand of food is between 0 and 1. The law was named after the statistician Ernst Engel (1821-1896)
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