--%>
Assignment Help - homework help

Why does a demand curve slope downward

Why does a demand curve slope downward?

E

Expert

Verified

The demand curve slopes downward because of the substitution and income effects.  As price of a product reduces relative to that of replacements, a buyer will substitute the now cheaper commodity for those whose prices have not changed.  At the same time, the decreased price of the commodity under discussion will make the buyer wealthier in real terms.  More can be bought of this commodity (as well as of others whose prices have not changed).  Accordingly, replacement and income effects reinforce each other: More will be bought of a normal (or superior) commodity as its price decreases.

   Related Questions in Business Economics

  • Q : Illustrate major economic flows that

    Illustrate major economic flows that link U.S. with nations.  Provide an example to illustrate each flow.  Explain the relationship between the top and bottom flows.

    		•
  • Q : Barter - Efficiency and the Gains from

    Relative to other systems, economies in that people exchange goods or resources directly along with other people for other goods or resources without using money like a usual denominator rely relatively heavily upon: (i) barter. (ii) specialization. (

    		•
  • Q : Slope of a straight line is the ratio

    Explain the slope of a straight line is the ratio of the vertical change to horizontal change between any two points on the line?

    		•
  • Q : Need of the Economic Efficiency

    Economic efficiency for society needs which the: (i) opportunity costs of all goods be at their lowest possible values. (ii) maximum probable benefits are acquired for given costs. (iii) greatest possible net benefits are squeezed through available re

    		•
  • Q : Equilibrium market rate & Undervalued

    Question: a. In the short-run, it is easier for a country to maintain a peg that undervalues a currency (relative to the equilibrium market rate) than it is to maintain a peg that overvalues the currency (relative

    		•
  • Q : What are the 2 definitions of economics

    What are the 2 definitions of economics growth?

    		•
  • Q : Demand supply Newspaper item: “Due to

    Newspaper item: “Due to lower grain prices, consumers can expect retail prices of choice beef to begin dropping slightly this spring with pork becoming cheaper after midsummer,” the Agriculture Department predicted. “This reflects increasing supply,” the department said. Does the statement use th

    		•
  • Q : Perfectly competitive market and its

    Which of the given is not a characteristic of a perfectly competitive market structure: w) there are a very huge number of firms which are small compared to the market. x) All firms sell the same products. y) There are no restrictions to entry through

    		•
  • Q : Explain the foundation of economics

    Explain the foundation of economics where society’s material wants are unlimited?

    		•
  • Q : If resources were unlimited and freely

    Explain this statement:  “If resources were unlimited and freely available, there would be no subject called economics.”

    		•