Question

question 6 (10 points)
which of the following statements is most accurate about the slope of the demand curve for a typical good?

a) it has a negative slope because some consumers switch to other goods as the price rises.

b) it has a negative slope because consumer incomes fall as the price of the good rises.

c) it has a negative slope because the good has less \snob appeal\ as its price falls.

d) it has an inverse slope because as the price goes up there is less profit available.

Explanation:

A typical good follows the law of demand: as price rises, quantity demanded falls, creating a negative slope. Option a correctly identifies the substitution effect, where consumers switch to substitute goods when a good's price increases, reducing demand for the original good. Option b is wrong because consumer incomes don't fall when a single good's price rises. Option c describes a Veblen good (not typical). Option d refers to producer profit, which does not explain consumer demand curve slope.

Answer:

a) It has a negative slope because some consumers switch to other goods as the price rises.