Business Environment, 1st Edition by Pearson

| 196 | Part III: The Economics of Development

services by the people of these countries. People buy in increasing

measure goods such as bikes, cars, colour TVs, music systems,

perfumes, superior textile, etc. even before improving their dietary

contents. Demonstration effect, in effect, challenges the premises

of Engel’s law of family expenditure which in essence implied

that as incomes of the people increased, they fi rst exhausted the

consumption of essential goods, then if the increment in income

was still maintained, they moved up towards comforts, luxuries and

so on. Demonstration effect proved that though there was not any

substantial increase in the food consumption standards, the total

consumption was increasing because of the increase ...