The demand curve slopes downward to the right because
A)an increase in income leads to increased consumption.
B)when expected future prices rise,the quantity demanded increases.
C)of the substitution effect and the income effect.
D)of comparative advantage.
E)as income rises,the quantity demanded increases.

Question

Quizplus · Accepted Answer

The downward slope of the demand curve is a result of both the substitution effect and the income effect. The substitution effect states that as the price of a good increases, consumers will switch to a cheaper alternative, decreasing the quantity demanded. The income effect states that as the price of a good decreases, consumers’ purchasing power increases, leading them to consume more of the good, increasing the quantity demanded. Together, these two effects create a downward slope on the demand curve.

The Demand Curve Slopes Downward to the Right Because