Economic Wisdom to Apply in Your Twenties

Chapter 18

Chapter 2, Section 6 The less you eat, the better your life
There is an old Chinese saying: food and sex are also sex.It is human nature to say that food is the most basic need of human beings.The so-called "food is the most important thing for the people", for ordinary people, eating is the most important thing in the world.Therefore, the Chinese have formed a Chinese-style greeting that is completely different from foreign cultures: "Have you eaten?" This has also become a long-standing meeting language of the Chinese nation.

The "eating culture" that Chinese people are accustomed to has penetrated into every corner of social culture. Beating people is called "eating fists", if it doesn't work, it's "eat it", and if it doesn't work, it's called "eat it". ".It can be seen how important eating is in people's hearts!

However, when "have you eaten" was replaced by "hello" as a greeting when meeting, what kind of social status does it reflect?

Economists believe that with the development of the economy, people spend less and less on food and more and more on clothing, cars and entertainment.This phenomenon is called "Engel coefficient" reduction.

In 1857, the world-renowned German statistician Engel clarified a law: With the increase of family and personal income, the proportion of income spent on food will gradually decrease. This law is called Engel’s law, reflecting this The coefficient of the law is called the Engel coefficient.Engel's coefficient refers to the proportion of total food expenditure in total personal consumption expenditure.Its formula is expressed as:
Engel's coefficient (%) = total food expenditure / total household or personal consumption expenditure × 100%
According to Engel, the less a household earns, the greater the proportion of household income (or total expenditure) that is spent on food.As household income increases, the proportion of household income (or total expenditure) spent on food decreases.By extension, the poorer a country is, the greater the proportion of per capita income (or average expenditure) that is spent on food, and this proportion tends to decrease as the country gets richer.

Engel's law reveals the correlation between residents' income and food expenditure, and uses the ratio of food expenditure to total consumption expenditure to illustrate the impact of economic development and income increase on living consumption.

As we all know, food is the first need for human survival, and it must occupy an important position in consumption expenditure when the income level is low.With the increase of income, when the food demand is basically satisfied, the focus of consumption will begin to shift to other aspects such as clothing and use.Therefore, the poorer a country or family lives, the larger the Engel coefficient; conversely, the richer the life, the smaller the Engel coefficient.

Engel's coefficient is often used internationally to measure the living standards of people in a country and region.According to the standards proposed by the Food and Agriculture Organization of the United Nations, an Engel coefficient of more than 59% is poor, 50% to 59% is food and clothing, 40% to 50% is well-off, 30% to 40% is rich, and less than 30% is the richest.

恩格尔系数下降是一国经济发展的标志。新中国成立初期，我国城镇居民恩格尔系数在80%左右，之后长期在60%以上徘徊，温饱不足是那个时代我国百姓生活的真实写照。改革开放以后，城镇居民家庭人均可支配收入已由1978年的343元提高到2008年的15781元；恩格尔系数则从1978年的57.5%下降为2008年的37.3%。如今，我国百姓的消费结构正在向发展型、享受型升级。

With the improvement of living conditions, we now have a more obvious tendency to eat good food, eat refined food, pay attention to nutrition, and pursue convenience.In addition to eating, we need to improve living conditions, transportation and communication conditions, and greatly increase expenditures on culture and art, fitness and health care, and medical care to cultivate sentiments and improve physical and mental health.When we have more and more discretionary income in addition to eating and drinking, the Engel coefficient is decreasing, and our life is getting better and better!

Wisdom Pieces: Engel Coefficient Data of Urban and Rural Families in my country Over the Years
Studying Engel's coefficient is of great value for studying the economic situation of the whole society:
1. Used to determine the wealth of the family.

2. Analyze the consumption situation of different consumers.

3. Determine the level of economic development of a country and the level of prosperity of the people's lives.

(End of this chapter)