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In Business / High School | 2025-07-04

What do the income effect, the substitution effect, and diminishing marginal utility have in common?

A. They all help explain the upsloping supply curve.
B. They all help explain the downward-sloping demand curve.
C. All are required to explain the utility-maximizing position of a consumer.
D. They are all empirically measurable.

Asked by melodysgold

Answer (2)

The income effect, substitution effect, and diminishing marginal utility all help explain the downward-sloping demand curve by illustrating how consumers adjust their purchasing behavior in response to changes in income, price, and the satisfaction derived from goods. These concepts show the relationship between price and quantity demanded. They are essential for understanding consumer choices in economics. ;

Answered by GinnyAnswer | 2025-07-04

The income effect, substitution effect, and diminishing marginal utility all contribute to explaining the downward-sloping demand curve by revealing how consumer choices change with price and income variations. The correct choice in this context is B, as they all relate to understanding how demand varies with price. These concepts highlight the interconnectedness of consumer behavior in economics.
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Answered by Anonymous | 2025-07-06

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