State the causes for downward sloping of demand curve

Question

State the causes for downward sloping of demand curve?

Answer 1

Demand curve slopes downward by left to right it known as Negative Slope. Many causes are here for downward sloping of demand curve:-

a) Law of Diminishing Marginal utility:
Like the consumer buys increasingly of the commodity, the marginal utility of extra units decreases. Thus the consumer is willing to pay only lower prices for additional units. When the price is higher, then he will limit its consumption

b) Concept of Equi- Marginal Utility:
Consumer will arrange his purchases in proper a way that the marginal utility is equivalent in all his purchases. If this is not equal, then they will change their purchases untill the marginal utility is equivalent.

c) Income effect:
While the price of the commodity falls, the real income of the consumer will raise. He will spend this raised income either to buy additional quantity of similar commodity or other commodity.

d) Substitution effect:
While the price of tea falls, this becomes cheaper. Thus the consumer will substitute such commodity for coffee. It leads to a raise in demand for tea.

e) Various uses of a commodity:
Several commodities have several uses. When the price of the commodity is high, its utilization will be restricted only for significant purpose. For example: when the price of tomato is high, this will be used only for cooking reason. When this is cheaper, this will be used for preparing jam and pickle etc...

f) Psychology of people:
Psychologically affected people buy more of a commodity while its price falls. Conversely, it can be termed as price consequence.

g) Tendency of human beings to satisfy and/or unsatisfied needs.