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Q28 (CDS-I/2014) Economy › Growth, Development, Poverty & Employment › Household consumption patterns Answer Verified

Share of food in total consumption expenditure has been coming down as per capita income grew over time in last sixty years because

Result
Your answer: —  Â·  Correct: C
Explanation

The phenomenon described is a classic application of Engel's Law, which states that as household income increases, the proportion of income spent on food decreases, even if the absolute expenditure on food rises [2]. This occurs because the income elasticity of demand for food is typically between 0 and 1, meaning food demand is income-inelastic [2]. Consequently, while people may diversify their diets toward higher-value items like meat, fruits, or processed foods as their disposable income grows [4], the growth rate of food expenditure remains lower than the growth rate of per capita income [2]. Over the last sixty years, as per capita income has risen, households have allocated a larger share of their budget to non-food items such as health, education, and recreation, leading to a declining share of food in total consumption expenditure [2].

Sources

  1. [1] https://pmc.ncbi.nlm.nih.gov/articles/PMC2935126/
  2. [2] https://en.wikipedia.org/wiki/Engel%27s_law
  3. [4] Indian Economy, Vivek Singh (7th ed. 2023-24) > Chapter 12: Supply Chain and Food Processing Industry > Facts of Food processing sector/industry in India: > p. 364
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