Why is the Engel's curve of luxury goods become flatter as income increase? Conversely, why is the Engel's curve of necessity goods become steeper as income increases? See image for context.

NAME 75 tables below report total current consumption expenditures and expendi- 76 DEMAND (Ch. 6] tures on certain major categories of goods for 5 different income groups in the United States in 1961. People within each of these groups all had (d) Which of these goods satisfy your textbook's definition of necessity similar incomes. Group A is the lowest income group and Group E is the highest. goods at most income levels? Food prepared at home, Table 6.1 housing. Expenditures by Category for Various Income Groups in 1961 (e) On the graph below, use the information from Table 6.1 to draw "Engel curves." (Use total expenditure on current consumption as income Income Group A B C D E for purposes of drawing this curve.) Use red ink to draw the Engel curve Food Prepared at Home 465 783 1078 1382 1848 for food prepared at home. Use blue ink to draw an Engel curve for food Food Away from Home 68 171 213 384 872 away from home. Use pencil to draw an Engel curve for clothing. How Housing 626 1090 1508 2043 4205 does the shape of an Engel curve for a luxury differ from the shape of Clothing 119 328 508 830 1745 an Engel curve for a necessity? The curve for a luxury Transportation 139 519 826 1222 2048 Other 364 745 1039 1554 3490 gets flatter as income rises, the curve for Total Expenditures 1781 3636 5172 7415 14208 a necessity gets steeper. Total expenditures (thousands of dollars) Table 6.2 12 Percentage Allocation of Family Budget Blue Pencil Red line line line 9 Income Group D Food Prepared at Home 26 27 21 10 13 Food Away from Home 3.8 4.7 1.1 5.1 6.1 Housing 35 30 29 28 30 Clothing 9.0 9.8 11 12 Transportation 7.8 14 16 17 14 750 1500 2250 3000 Expenditure on specific goods (a) Complete Table 6.2. 6.10 (0) Percy consumes cakes and ale. His demand function for cakes is qa = m - 30p. + 20pa, where m is his income, p. is the price of ale, po (6) Which of these goods are normal goods? All of them. is the price of cakes, and ge is his consumption of cakes. Percy's income is $100, and the price of ale is $1 per unit. (e) Which of these goods satisfy your textbook's definition of luxury A goods at most income levels? Food away from home, (a) Is ale a substitute for cakes or a complement? Explain. clothing, transportation. substitute. An increase in the price of ale increases demand for cakes