Why does the money demand curve have a negative slope?

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1190372

2026-03-09 14:05

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  • when price decrease purchasing power of the people increases so they can buy more with the same amount of money this is called income effect.
  • if the price of some commodity say mangoes decreases while the price of its substitute like Apple remain the same people fell that this commodity is relatively cheaper so they decrease the purchase of Apples and buy more of mangoes this is substitution effect.
  • fall in price bring new buyers into the market many people who could not buy at higher price now start buying

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