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In most circumstances the demand curve has a negative slope, and therefore slopes downwards. This is due to the law of demand which conditions that there is an inverse relationship between price and the demand of commodity (good or a service). As price goes up quantity demanded reduces and as price reduces quantity demanded increases.
The negative slope of the indifference curve incorporates the willingness of the consumer to make trade offs. [9] If two goods are perfect substitutes then the indifference curves will have a constant slope since the consumer would be willing to switch between at a fixed ratio. The marginal rate of substitution between perfect substitutes is ...
This graphical illustration is still used today to define and explain a variety of other concepts and theories in economics. A simple explanation of the law of demand is that all else equal, at a higher price, consumer will demand less quantity of a good and vice versa. The law of demand applies to a variety of organisational and business ...
Under the standard assumption of neoclassical economics that goods and services are continuously divisible, the marginal rates of substitution will be the same regardless of the direction of exchange, and will correspond to the slope of an indifference curve (more precisely, to the slope multiplied by −1) passing through the consumption bundle in question, at that point: mathematically, it ...
A differentiable function f is (strictly) concave on an interval if and only if its derivative function f ′ is (strictly) monotonically decreasing on that interval, that is, a concave function has a non-increasing (decreasing) slope. [3] [4] Points where concavity changes (between concave and convex) are inflection points. [5]
[2] [3] The law of diminishing returns does not cause a decrease in overall production capabilities, rather it defines a point on a production curve whereby producing an additional unit of output will result in a loss and is known as negative returns. Under diminishing returns, output remains positive, but productivity and efficiency decrease.
[5] [6] If the person experiences an increase in wealth, he/she will choose to increase (or keep unchanged, or decrease) the number of dollars of the risky asset held in the portfolio if absolute risk aversion is decreasing (or constant, or increasing). Thus economists avoid using utility functions such as the quadratic, which exhibit ...
Inferior goods with negative income elasticity, assume negative slopes for their Engel curves. In the case of food, the Engel curve is concave downward with a positive but decreasing slope. [9] [8] Engel argues that food is a normal good, yet the share of household's budget spent on food falls as income increases, making food a necessity. [4] [8]