Question

Why does a demand curve slope downward from left to right?

Answer 1

The demand curve slopes downward from left to right because of the inverse relationship between price and quantity demanded. As the price of a good falls, the quantity demanded increases, and vice versa. The quantity demanded can be explained in terms of the following factors:

1. Law of Diminishing Marginal Utility: The first explanation of downward sloping demand curve rests on the notion of utility. We consume goods and services because they give us utility.
2. Income Effect: A change in demand on account of a change in the real income resulting from a change in the price of a commodity is known as the income effect.
3. Substitution Effect: Another reason why we expect the demand curve to slope downwards is the substitution effect. The substitution effect is the effect that a change in relative prices of substitute goods has on the quantity demanded.
4. Increase in Number of Consumers: A fall in the price of a commodity leads to an increase in the quantity demanded by the existing consumers due to income and substitution effects.
5. Several Uses of a Commodity: There are some goods which can be put to a number of uses. Some of these uses are more important, while others are less important.