The quantity of a good demanded tends to increase as its price falls because:
A)a decrease in price shifts the demand curve to the right.
B)a decrease in price shifts the demand curve to the left.
C)a decrease in price shifts the supply curve to the right.
D)a decrease in price leads consumers to substitute toward this now relatively cheaper product.

Question

The quantity of a good demanded tends to increase as its price falls because:
A)​a decrease in price shifts the demand curve to the right.
B)​a decrease in price shifts the demand curve to the left.
C)​a decrease in price shifts the supply curve to the right.
D)​a decrease in price leads consumers to substitute toward this now relatively cheaper product.

Quizplus · Accepted Answer

When the price of a good decreases, it becomes relatively cheaper compared to other goods, which leads to an increase in demand as consumers tend to substitute towards buying more of that product. This is known as the substitution effect, which is one of the reasons why the quantity demanded of a good tends to increase as its price falls.

The Quantity of a Good Demanded Tends to Increase as Its