Economics • Economic BasicsMedium
Which of the following economic concepts describes the situation where an individual's welfare depends not only on their own consumption but also negatively on the consumption of others, famously known as 'Keeping up with the Joneses'?
A. Veblen Effect
B. Bandwagon Effect
C. Snob Effect
D. Demonstration Effect✓ Correct Answer
💡 Solution & Explanation
James Duesenberry formulated the demonstration effect to explain how an individual's consumption pattern is influenced by the lifestyle and spending habits of their peer group. The Veblen effect describes conspicuous consumption driven by high status rather than peer emulation.
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