Question

The law of demand results from which two patterns of behavior?

demand schedule and income schedule
demand graph and demand curve
all of the above
substitution effect and income effect

Answer 1

substitution effect and income effect

Step-by-step explanation:

Simply put, the law of demand states that if all other factors remain constant, if a price of a good is higher, fewer people will demand it. As the price of this good falls, the amount of good that the market will demand will increase. That is, the law of demand indicates that under normal conditions in a market, the quantity demanded is inversely proportional to the price of the good in question. That is, if a product has a low price, it will probably have a great demand.

Accordingly, we can state that the law of demand results from the substitution effect and the income effect.

Answer 2

The correct answer is the following: "substitution effect and income effect".

The demand function represents the quantity of a certain good or service that consumers are willing to purchase in the market at different price levels. The law of demand states that there is an inverse relationship between price and quantity demanded (ceteris paribus, hence, given that the rest remains equal). Therefore, when the price charged increases, the amount that consumers are willing to offer decreases.

The variation of the quantity, due to the price variation, takes place because of the joint incidence of two effects: the effect of the variation of the relative price if compared to other goods (substitution effect) and the effect on the consumer's income as, if the price of a desired or purchased product has increased, the consumer's available income will decrease (income effect).