the income effect, the substitution effect, and diminishing marginal utility together explain: multiple choice question. the importance of prices. how markets function. why demand curves are downward-sloping. why demand curves exist.

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21-10-2022
Business

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the income effect, the substitution effect, and diminishing marginal utility together explain: multiple choice question. the importance of prices. how markets function. why demand curves are downward-sloping. why demand curves exist.

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kumarkrishna kumarkrishna · Answer 1 · 2022-10-24T12:49:53-04:00

The income effect, the substitution effect, and diminishing marginal utility together explain why demand curves are downward-sloping.

A consumer's increased enjoyment from owning one extra unit of a good or service is known as marginal utility. Economists utilize the idea of marginal utility to estimate how much of a given good buyers are willing to buy. When a product's price increases, consumers may switch to less expensive substitutes, which results in a decline in sales. The income effect and the substitution effect are the two factors that affect how much a consumer will desire of a commodity when its price changes. The Hicks substitution effect makes the new point of tangency and the old bundle different from one another.

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