Question

What are the two things that support the negative slope of a demand curve?

I. Income effect
II. Law of supply
III. Equilibrium
IV. Substitution effect
V. The midpoint formula
A. I and II
B. III and IV
C. I, IV, and V
D. I and IV
E. II, IV, and V

Answer 1

The income effect and the substitution effect are the two things that support the negative slope of a demand curve.

Step-by-step explanation:

The two things that support the negative slope of a demand curve are the income effect and the substitution effect. The income effect refers to the change in the quantity demanded of a good due to a change in a consumer's real income. When the price of a good decreases, the consumer's purchasing power increases, which leads to an increase in the quantity demanded of the good.

The substitution effect, on the other hand, relates to the change in quantity demanded as a result of a change in relative prices. When the price of a good decreases, it becomes relatively cheaper compared to other goods, which incentivizes consumers to substitute the more expensive goods with the cheaper one, leading to an increase in the quantity demanded.