Question

Briefly explain any three determinants for the negative slope of the demand curve.

Why does the demand curve slope downwards from left to right?

Explain briefly the causes of operation of the Law of demand.

Answer 1

Reasons for the Downward sloping Demand curve

1. The law of diminishing marginal utility: The law states that with consumption of an additional unit of a commodity, marginal utility derived from successive units goes on declining. A consumer. will buy more and more units of commodity only when he has to pay less and less price for each additional unit.
2. Income Effect: When price of commodity falls, consumers real income or purchasing power increases. This induces them to buy more of that commodity, thus demand increases and vice-versa.
3. Change in number of buyers: When the price of a commodity falls, some new consumers start purchasing it, consequently the demand for that commodity increases. On the other hand, when the price rises, existing consumers may stop purchasing the commodity, thus the demand for that commodity will fall.