The Engel curve (also called the real expenditure Engel curve, to distinguish it from the budget share Engel curve) for a good, service, or commodity is defined with the following backdrop:
- The specific good, service, or commodity.
- A unit for measuring the quantity of that commodity.
- An economic actor (individual or household).
- A time frame within which demand and income are measured.
- An economic backdrop that includes the unit price of the commodity and all other determinants of demand except the income of the economic actor.
The Engel curve is a curve drawn as follows:
- The vertical axis is the income axis, measuring the income of the economic actor within the time frame.
- The horizontal axis is the total expenditure of the economic actor within the time frame for the given income.
Note that, scaling the horizontal axis by the reciprocal of the price of the good, we get an Engel curve where the horizontal axis is the total quantity of the good purchased/consumed.