--%>

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 : Explain the definition of Economics

    Explain the definition of Economics?

  • Q : Determine equilibrium prices market

    The new supply and demand curves within University City were S0 and D0, before the county commission imposed a $3 per six-pack excise tax upon beer. The new equilibrium quantities of six-packs sold per month and equilibrium prices, respectively,

  • Q : Example of self interest to define

    The concept of _____ was demonstrated by _____ along with the quotation, “The defeat of a bit finger would remain the average European from sleeping which night,... but, given he never saw them, he will snore along with the most profound security over the loss o

  • Q : External factors which influencing the

    Write down the external factors which influencing the capital structure?

  • Q : Market Apparent program For the

    For the question below, utilize the given information. The market for gizmos is competitive, with an increasing sloping supply curve and a downward sloping demand curve. With no govt. intervention, the equilibrium price is $25 and the equilibrium quantity is 10,000 gi

  • Q : Initial systematic and popular

    The initial systematic and popular description of capitalism was explained in: (1) Sir Thomas Mun’s England’s Treasure by Foreign Trade. (2) Joseph A. Schumpeter’s Capitalism, Socialism, and Democracy. (3) John Maynard Keynes’

  • Q : Briefly state the pros and cons of

    Briefly state the pros and cons of Partnership?

  • Q : Why does the supply curve slope upward

    Explain the law of supply. Why does the supply curve slope upward?

  • Q : Human Resource Management problems

    Question Write a report on a local firm that faces Human Resource Management problems. Pick two major problems and provide solutions to it. The company selected must

  • Q : Describe cost of equity shares Briefly

    Briefly describe cost of equity shares? And also write down way to evaluate the cost of equity shares?