Latching effect (ratchet effect)

The latching-in effect (ratchet effect) states that spending on consumer goods falls less sharply when income falls than it used to rise when income rises. This demand effect is therefore a remanence or inertia in the area of private consumption. The fact that consumers are slow to adapt is due to the fact that they are very reluctant to give up their accustomed standard of living and the associated position in society.

When income falls temporarily, consumer spending is not reduced to the same extent, but less savings are made, wealth is tapped and / or debts are incurred. When income rises again, consumption is not immediately increased accordingly, but part of the disposable income is saved or used to pay off debts. With their income, the consumers first have to grow back into the excessive consumer clothing.

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