--%>
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 how Macroeconomics examines

    Illustrate how Macroeconomics examines the economy as a whole?

    		•
  • Q : How market system promotes

    How market system promotes technological improvements?

    		•
  • Q : Explain a refutation of the doctrines

    Adam Smith wrote his Wealth of Nations within part like a refutation of the doctrines: (1) classical liberalism. (2) utilitarianism. (3) mercantilism. (4) physiocracy. (5) laissez faire capitalism.

  • Q : Illustrate receipts from several

    Illustrate how receipts come from several sources in Federal Finance?

    		•
  • Q : Consumer and producer surplus in the

    In perfectly competitive market, the market demand and market supply curves are provided by Qd = 1000 −10Pd and Qd = 30Ps. Assume that the government gives a subsidy of $20 per unit to each and every seller in the mark

    		•
  • Q : When productive resources are utilized

    While productive resources are utilized efficiently: (w) prices greatly exceed production costs for current outputs. (x) opportunity costs are at their minimums for all goods. (y) domestic production exceeds the value of foreign output. (z) the value

    		•
  • Q : What are the major provisions of GATT

    What are the major provisions of GATT

    		•
  • Q : How government might manipulate its

    Explain how government might manipulate its expenditures and tax revenues to reduce unemployment?

    		•
  • Q : Comparison between EVA and Ratio

    Comparison between EVA and Ratio Analysis: EVA helps in measuring the economic performance of the company. It is the profit earned by the firm less the cost of financing the firm’s capital. It shows that the shareholders gain when the return fro

    		•
  • Q : Contestable Markets The least probable

    The least probable of the given industries to be a contestable market is: (1) video rentals. (2) pizza delivery. (3) cable television. (4) trucking. Can someone explain/help me with best solution about problem of <

    		•