This document discusses three concepts related to consumer demand theory: the bandwagon effect, snob effect, and Veblen effect. The bandwagon effect refers to how consumer demand for a product increases when others are also consuming it. The snob effect is the reverse, where demand decreases when a product becomes too mainstream. The Veblen effect means demand increases when a product's price is higher, as it signals wealth and status. The document proposes incorporating these effects into demand theory by accounting for interpersonal utility factors like social influence, exclusivity desires, and conspicuous consumption. It suggests demand curves may not represent simple individual preferences due to these external consumption effects.

1. Bandwagon,Snob and Veblen Effects In The Theory of Consumers’ Demand

2. Objective Incorporating the following phenomenon in the theory of consumers’ demand - Desire of consumers to be in style - Attempts to obtain exclusivity - Conspicuous consumption

3. Demand Theory Reconsidered Market demand curve may not be the lateral summation of individual demand curves in some cases Interpersonal aspects of utility and demand Impact of Non functional utilities

4. Assumptions Static Analysis - A static situation is one in which the order of events has no significance Income and expenditure patterns repeat themselves in every period

5. Demand Classified Demand Functional Non Functional External effects on utility Speculative Irrational

6. Bandwagon Effect Extent to which demand for a commodity is increased due to the fact that others are also consuming the same commodity at a given price Be in sync with the times Eg: Ronaldo’s hairstyle during the football world cup

7. Conceptual Experiment Assume that an individual’s demand is a function of the total market demand at given prices Obtain individual demand data from consumers’ (given market demand at fixed price) Repeat the above process using the preceding survey data as a base

8. Implications Diminishing marginal external consumption effect - Demand does not increase indefinitely - Income constraint Concept of equilibrium demand curve - Marginal external consumption effect for all consumers’, but one,at all alternate prices is equal to zero

9. The Snob Effect Extent to which the demand for a consumers’ good is decreased owing to the fact that others are consuming the same commodity Reverse of Bandwagon effect

10. Veblen Effect Extent to which the demand for a consumers’ good is increased because it bears a higher than a lower price Veblen effect is a function of price Real price vs. Conspicuous price - Real Price is paid in monetary terms - Conspicuous price is what other people think consumer paid for the commodity

11. Thank You Rohan Warey Section A - 45