Real Incomes and Subjective Happiness

Question 1

What is the relationship between real incomes and subjective happiness?

Answer 1

As real incomes increase, people generally become happier, especially in low- and middle-income contexts. However, after a certain level, further income gains have diminishing marginal returns on happiness.

📊 Easterlin Paradox: Suggests that happiness rises with income only up to a point, beyond which it levels off.

✏️ Other Influences on Happiness:

Health

Family relationships

Job satisfaction

Inequality

📝 Exam angle:

“To what extent is real income a reliable measure of living standards or happiness?”