Which of the following explains why demand curves slope downward?

Question

Quizplus · Accepted Answer

The substitution effect and income effect both contribute to the downward slope of the demand curve. The substitution effect states that as the price of a good increases, consumers will switch to a cheaper substitute, causing a decrease in demand for the original good. The income effect states that as the price of a good decreases, consumers' purchasing power increases, allowing them to purchase more of the good, causing an increase in demand. Together, these effects lead to a downward sloping demand curve.

Which of the Following Explains Why Demand Curves Slope Downward