Ratchet Effect

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#Ratchet Effect (#Consumption):-The other significant part of Duesenberry's relative income hypothesis is that it suggests that when income of individuals or households falls, their consumption expenditure does not fall much. This is often called a ratchet effect.

   #Ratchet effect (#Production):-It refers to escalations in production or prices that tend to self-perpetuate. Once productive capacities have been added or prices have been raised, it is difficult to reverse these changes because people are influenced by the previous best or highest level of production.

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