One reason demand curves for individual products are downward sloping is because of the
A)wealth or real-balances effect.
B)substitution effect.
C)substitution-of-foreign-goods effect.
D)constant-nominal-income effect.

Question

Quizplus · Accepted Answer

The substitution effect states that as the price of a product decreases, consumers will switch from substitute products to the lower-priced product, increasing demand for the product. Thus, the demand curve for individual products is downward sloping because as the price decreases, quantity demanded increases due to the substitution effect.

One Reason Demand Curves for Individual Products Are Downward Sloping