Which of the following types of preferences and utility do NOT necessarily generate straight-line Engel curves?...

Which of the following types of preferences and utility do NOT necessarily generate straight-line Engel curves?

Perfect substitutes
Leontiev
Cobb-Douglas
Quasi-Linear
A and C

Solutions

Expert Solution

Answer: B) Leontief

Engel curve is a straight line: m = p1x1/a. The consumer has homothetic preferences, if the demand for good goes up by the same proportion as income.Thus perfect substitutes, perfect complements and Cobb-Douglas are homothetic preferences.

In case of quasi-linear preferences, income effect for x₁ is zero. Engel curve is a vertical straight line

Rahul Sunny answered 1 year ago

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