Demand curves slope downward because
A) the substitution effect, which is always positive, dominates or reinforces the income effect.
B) the substitution effect, which is always negative, dominates or reinforces the income effect.
C) the income effect, which is always positive, dominates or reinforces the substitution effect.
D) the income effect, which is always negative, dominates or reinforces the substitution effect.

Question

Quizplus · Accepted Answer

The substitution effect, which is always negative, explains why consumers will buy less of a good as its price rises, substituting it with cheaper alternatives. This effect contributes to the downward slope of demand curves.

Demand Curves Slope Downward Because