The relative income hypothesis was developed by James Duesenberry in 1949.
It consists of two separate consumption hypothesis.
The first hypothesis states that an individual's attitude to consumption is dictated more by their income in relation to others than by an abstract standard of living.
The second hypothesis states that the present consumption is influenced not merely by present levels of absolute and relative income but also by levels of consumption attained in a previous period.
In Duesenberry's opinion, it is difficult for a family to reduce a level of consumption once it is attained.