What does Engel's coefficient mean?

Engel's coefficient is a measure used in finance and economics to assess the relationship between household income and the amount spent on food. It is essentially a way to gauge the level of a household's food expenditure in relation to their overall income. The coefficient is calculated by taking the percentage of a household's income that is spent on food and comparing it to the total income. The coefficient is named after the German statistician Ernst Engel, who first introduced the concept in the 19th century. Engel's coefficient is often used as an indicator of a household's standard of living, with lower coefficients indicating higher levels of affluence and higher coefficients indicating lower levels of affluence. In finance, Engel's coefficient can be useful for analyzing consumer behavior and spending patterns, as well as for assessing the impact of inflation and changes in income on food consumption. It can also be used to compare the food expenditure patterns of different income groups and to identify trends in food consumption and affordability. Overall, Engel's coefficient serves as an important tool for understanding the relationship between income and food expenditure, and can provide valuable insights into the financial well-being and consumption habits of households.