Explain all the reasons why a decrease in a product's price would lead to an increase in purchases.

When it comes to understanding how price changes affect consumer behavior, the concept of purchasing power is paramount. Increasing purchasing power essentially means that consumers have more currency to spend on goods and services. A product's price decrease enhances this power because individuals can buy more with the same amount of money.

For example, if the price of a gallon of milk drops, consumers can either choose to buy more milk than usual or use the savings on other needs or wants. This increase in what one can afford is an integral part of why demand often goes up when prices fall, making it easier for a larger portion of the population to access the product.

The market is driven by the intricate dance between demand and supply. As the cost of a product decreases, the relationship stipulates that its demand typically increases if we hold other factors steady—known as ceteris paribus in economic terms. This correlation is a fundamental principle that underscores consumer activity.

Lower prices might elevate demand because they reduce barriers to entry; more consumers feel that they can afford the product. This increase in demand due to a price decrease—one aspect of the law of demand—shows the responsiveness, or elasticity, of the market to price changes.

A key factor in consumer purchasing decisions is the income effect, which explains how changes in price influence the buyer's real income. Lower prices mean that consumers can maintain or increase their purchases without spending more money, effectively boosting their real income. It's an interesting concept because it ties in directly with how consumers perceive their financial well-being.

The income effect occurs because, as prices drop, the money saved can be redirected towards buying more of the same product or different products, demonstrating a shift in the consumer's consumption as a response to price changes.

The substitution effect plays a critical role in how consumers react to price changes. When a product becomes cheaper relative to its substitutes, people tend to prefer the more affordable option. This behavior highlights consumers' desire to maximize their utility or satisfaction from consumption while staying within their budget.

Thus, if the price of a certain brand of orange juice plummets, buyers might switch from their usual, more costly brand to the one that's now cheaper. This effect doesn't just influence the sales of one particular item; it can also sway the overall market share within a category of goods.

All the mentioned concepts culminate in the study of consumer behavior, which examines the reasons behind people's purchasing choices. This includes the mentality that shoppers have when they see price decreases—often they associate such reductions with sales and discounts, rendering the items more attractive and 'must-buy' opportunities.

Consumers may also exhibit herd behavior; when they notice others buying a product because of a decreased price, they might follow suit, boosting sales further. Understanding the complex interplay of psychological, financial, and economic factors is crucial for businesses and economists alike when analyzing the consumer response to price changes.