The income effect, substitution effect, and diminishing marginal utility all help explain:

The income effect, substitution effect, and the concept of diminishing marginal utility are key components in explaining why demand curves typically slope downward.

The income effect refers to the change in consumer purchasing power as prices change. When the price of a good decreases, consumers effectively have more income available to spend, allowing them to purchase more of that good, which leads to an increase in quantity demanded. Conversely, if the price rises, their purchasing power diminishes, resulting in a decrease in quantity demanded.

The substitution effect occurs when consumers replace more expensive items with cheaper alternatives as prices fluctuate. If the price of a product decreases, consumers may buy more of it instead of other products that have remained at a higher price, leading again to an increase in quantity demanded.

Diminishing marginal utility is the principle that the additional satisfaction gained from consuming more of a good decreases as consumption increases. As consumers buy more units of a good, the value they place on each additional unit decreases, influencing them to buy less as the price rises and more as the price falls.

Together, these effects create a downward-sloping demand curve. As the price of a good decreases, demand increases, while an increase in price leads to a decrease in demand. This fundamental relationship illustrates why demand