Question

Which of the following is not an explanation as to why the demand curve is negatively sloped?

Select one:

a. the income effect

b. the law of diminishing marginal utility

c. the substitution effect

d. the law of increasing total utility

Answer 1

which of the following is not an explanation as to why the demand curve is negatively sloped?

ANS) D) THE LAW OF INCREASING TOTAL UTILITY

EXPLANATION:

DEMAND CURVE is used to show how single individual/market responds to a price change. The demand curve will move downward from left to right. It represents Law of Demand. If the price of the commodity decreases the quantity demanded for the commodity decreases. demand curve are negatively gradient which indicates the inversee relationship between the price and the quantity. the three explanation of why the demand curve slopes downward are

1) The Law of Diminishing Marginal utility

2) The Income Effect

3) The Substitution Effect

The Law of Diminishing Marginal utility:

It states that the consumption increases the marginal utility derived from each additional unit declines. Marginal utility is derived as the change in utility as an additional unit is consumed. For great understanding it can be explained as follows

The Most benefit are generated by the first unit of a good consumed because it meet the  immediate need or desire of the consumer. second unit consumed may generate less benefit which means the consumer has less need. if the utility from a particular product is less then the consumer willing to pay for the extra unit decreases, the marginal utility falls. here it is negatively sloped.

The Income Effect:

The income effect is the change in demand for a good caused by a change in a consumer's purchasing power due to the change in real income of the consumer.if the money income is fixed, the income effect represents that , as the price of a good falls,then the consumer buy more of that good with his income, the demand for the product increases. Rise in price will reduce real income and force consumers to cut back their demand for that product.

The Substitution Effect:

The substitution effect is the decrease in sales for a product that can be attributed to consumers switching to cheaper alternatives when its price rises.The substitution effect kicks in when a product's price increases but the consumer's spending power stays the same.

As these three are the explanation why the demand curve slopes downwards, these 3 are not the optimal answer for our question.

the correct answer is the law of increasing total utility because Total Utility means the total utility increases with increase in total quantity. these are directly proportional to each other. here the curve is not negatively sloped. where other 3 graphs are negatively sloped.

NOTE: the graphs are attached as an image.