Demand Curves/ Income + Substitution Effects Flashcards
1
Q
What is the income effect??
A
A fall in price means more is bought because real purchasing power of consumer increases
2
Q
What is the substitution effect??
A
Fall in price means a good is a relatively cheaper alternative to other products, so more of that product is bought
3
Q
What does the demand curve show??
A
The relationship between the quantity demanded and the price of a product
4
Q
Why does a demand curve slope downwards from left to right??
A
Law of demand- at higher prices, less quantity of a product is demanded
