Budget share Engel curve

Definition

The budget share Engel curve for an individual or household is one of the forms of the Engel curve. The budget share Engel curve is defined in the context of:

• An individual or household who is the economic actor of interest.
• The good, service, or commodity for which we are interested in measuring the expenditure/consumption.
• A money unit for measuring income.
• A time unit for quoting income (for instance, specifying whether incomes are being quoted as monthly or annual incomes).

Define the budget share of the economic actor on the good of interest as the fraction of household income that the economic actor spends on the good of interest. Note that the budget share is a quantity between 0 and 1 (if we define "income" to include revenue streams such as loans, otherwise it may be greater than 1, but this is unlikely for any specific good).

The budget share Engel curve plots the budget share (on the horizontal axis) as a function of the household income (on the vertical axis).