For normal goods, the income and substitution effects help explain the downward slope of the demand curve.

Question

Quizplus · Accepted Answer

The income effect occurs when a price decrease effectively increases consumers' income, allowing them to buy more, while the substitution effect occurs when consumers switch from more expensive goods to the cheaper one, both contributing to the downward slope of the demand curve for normal goods.

For Normal Goods, the Income and Substitution Effects Help Explain