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The law of demand is most directly a result of:

A. The law of comparative advantage

B. The law of diminishing returns

C. The principle of substitution

D. Economics of large scale production

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Correct Answer : C.


The law of demand states negative relationship b/w quantity demanded and price and forms negative sloped demand curve. One of the reasons of negative sloped demand curve is the substitution effect (S.E) which states that as the price of a commodity raises then consumer decreases quantity demanded of that commodity and substitutes it with some other commodity.

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