Question : Which of the following curve describes the variation of household expenditure on a particular good with respect to household income?
Option 1: Demand curve
Option 2: Engel curve
Option 3: Great Gatsby curve
Option 4: Cost curve
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Correct Answer: Engel curve
Solution : The correct option is the Engel curve.
The Engel curve is the curve that depicts how households spend on a specific good depending on household income. An Engel curve depicts while controlling for other variables, the relationship between the quantity of a good consumed and a consumer's income. It helps to show how shifting income levels affect consumers' desire for a particular good.
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