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Article: Relative Income Hypothesis
- Article from:
- International Encyclopedia of the Social Sciences
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Relative Income Hypothesis
BIBLIOGRAPHY
Relative income hypothesis states that the satisfaction (or utility) an individual derives from a given consumption level depends on its relative magnitude in the society (e.g., relative to the average consumption) rather than its absolute level. It is based on a postulate that has long been acknowledged by psychologists and sociologists, namely that individuals care about status. In economics, relative income hypothesis is attributed to James Duesenberry, who investigated the implications of this idea for consumption behavior in his 1949 book titled
Income, Saving and the Theory of Consumer Behavior
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At the time when Duesenberry wrote his book ...