CHAPTER • Individual and Market Demand 117 an upward-sloping Engel curve, is derived directly from Figure 4.2 (a) In both figures, as the individual’s income increases from $10 to $20 to $30, her consumption of food increases from to 10 to 16 units Recall that in Figure 4.2 (a) the vertical axis measured units of clothing consumed per month and the horizontal axis units of food per month; changes in income were reflected as shifts in the budget line In Figures 4.4 (a) and (b), we have replotted the data to put income on the vertical axis, while keeping food and hamburger on the horizontal The upward-sloping Engel curve in Figure 4.4 (a)—like the upward-sloping income-consumption curve in Figure 4.2 (a)—applies to all normal goods Note that an Engel curve for clothing would have a similar shape (clothing consumption increases from to to units as income increases) Figure 4.4 (b), derived from Figure 4.3, shows the Engel curve for hamburger We see that hamburger consumption increases from to 10 units as income increases from $10 to $20 As income increases further, from $20 to $30, consumption falls to units The portion of the Engel curve that slopes downward is the income range within which hamburger is an inferior good E XAMPLE CONSUMER EXPENDITURES IN THE UNITED STATES The Engel curves we just examined apply to individual consumers However, we can also derive Engel curves for groups of consumers This information is particularly useful if we want to see how consumer spending varies among different income groups Table 4.1 illustrates spending patterns for several items taken from a survey by the U.S Bureau of Labor Statistics Although the data are averaged over many households, they can be interpreted as TABLE 4.1 describing the expenditures of a typical family Note that the data relate expenditures on a particular item rather than the quantity of the item to income The first two items, entertainment and owned dwellings, are consumption goods for which the income elasticity of demand is high Average family expenditures on entertainment increase almost fivefold when we move from the lowest to highest income group The same pattern ANNUAL U.S HOUSEHOLD CONSUMER EXPENDITURES INCOME GROUP (2009 $) EXPENDITURES ($) ON: LESS THAN $10,000 10,000– 19,999 20,000– 29,999 30,000– 39,999 40,000– 49,999 50,000– 69,999 70,000 AND ABOVE Entertainment 1,041 1,025 1,504 1,970 2,008 2,611 4,733 Owned Dwelling 1,880 2,083 3,117 4,038 4,847 6,473 12,306 Rented Dwelling 3,172 3,359 3,228 3,296 3,295 2,977 2,098 Health Care 1,222 1,917 2,536 2,684 2,937 3,454 4,393 Food 3,429 3,529 4,415 4,737 5,384 6,420 9,761 799 927 1,080 1,225 1,336 1,608 2,850 Clothing Source: U S Department of Labor, Bureau of Labor Statistics, “Consumer Expenditure Survey, Annual Report 2010.”