State with reason, whether you Agree or Disagree with the following statement.
Demand curve slopes downward from left to right.
I agree with the given statement.
The demand curve is the graphical representation of the relationship between the demand for a good and its price, for a given income, price of related goods, tastes, and preferences. This curve slopes downwards from left to right because of the negative relationship between the price of the commodity and its demand.
The following are the main reasons as to why the demand curve is downward sloping:
- Law of diminishing marginal utility- Due to this law, the consumer tends to buy more quantity of a good when the price falls.
- Income effect- With a fall in price, the purchasing power of a person rises. As a result, he demands more of a good.
- Substitution effect- With a rise in price, the substitutes of goods become cheaper in comparison. As a result, the person demands less of that good and more substitute goods.
- Multipurpose uses- The demand for goods having multipurpose uses rise with a fall in price and vice-versa.
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