For normal goods which of the following explains why demand curves slope downward?

Question

Quizplus · Accepted Answer

The substitution effect and income effect both contribute to why demand curves slope downward. The substitution effect occurs when the price of a good increases, causing consumers to switch to a cheaper substitute. The income effect occurs when the price of a good increases, reducing a consumer's purchasing power and causing them to buy less of the good. Both of these effects result in a decrease in quantity demanded at higher prices.

For Normal Goods Which of the Following Explains Why Demand