The inverse relationship between price and quantity demanded is called the

A. income effect
B. law of demand
C. law of supply
D. substitution effect



Answer :

Final answer:

The substitution effect explains the inverse relationship between price and quantity demanded in economics.


Explanation:

The inverse relationship between price and quantity demanded is called the substitution effect. This effect occurs when a change in the price of a good leads to consumers substituting it for other goods. In economics, the substitution effect is essential in understanding how consumers react to price changes and make decisions.

For example:

  1. When the price of coffee rises, consumers might choose to buy more tea instead.
  2. Conversely, if the price of tea decreases, consumers may opt to buy more tea and less coffee.

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