The demand for normal goods follows the law of demand because of
A)the substitution effect only.
B)the income effect only.
C)risk-aversion by consumers.
D)both the substitution and income effects.

Question

Quizplus · Accepted Answer

The demand for normal goods follows the law of demand because both the substitution effect (where consumers switch to a cheaper substitute when the price of a good increases) and the income effect (where the change in price affects the purchasing power of consumers' income) occur simultaneously.

The Demand for Normal Goods Follows the Law of Demand