ECON 6280 Lecture Notes - Lecture 8: Giffen Good, Poverty Trap, Engel Curve
Document Summary
High food prices: 2 consequences on those of the poor who are net consumers of food (i. e. not farmer -> High food prices: 2 consequences on those of the poor who are net consumers of food (i. e. not farmer -> e. g. urban poor) Larger portion of income must be spent on food. Vicious cycle of undernourishment -> less productivity -> lower income -> undernourishment. S-shaped relationship between income today and income tomorrow. If there was a nutrition-based poverty trap, the poor should eat as much as they can. Duflo"s study undermines the argument that nutrition-based poverty trap exists. The poor could increase their food consumption by spending more on food (less on other things) or by consuming higher calories. Engel curve = describes how household expenditure on a particular good/service varies with household income. Inferior good relationship between income and consumption of a good decreases. Normal good relationship between income and consumption stays the same.
