Economics · Theory of Demand
According to economic theory, demand curves typically have a negative slope primarily because:
Verified Solution4 OptionsUpdated: October 2026👁️1 View
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- 1Firms tend to produce less of a good that is more costly to produce
- 2The substitution effect always leads consumers to substitute higher quality goods for lower quality goods
- 3The substitution effect causes consumers to substitute away from a commodity when its relative price rises✓
- 4An increase in price increases real income for inferior goods
Correct answer
The substitution effect causes consumers to substitute away from a commodity when its relative price rises
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