What are the reasons behind downward sloping demand curve? |
|
Looks like you have not signed up yet. Please sign up now to view the answers without interruption. Redirecting in 60 seconds... |
| Ans : Generally, the demand curve (i.e. price demand curve) slopes downwards from left to right due to the following reasons:
i) Income effect:- When the price of commodity falls the purchasing power of consumer for that commodity will increase. So people will buy same product at less price. So when price decreases then demand increases. Hence the demand curve slopes downward from left to right.
ii) Substitution effect:- When the price of a commodity falls, it becomes cheaper that it’s substitute goods. When price of commodity is low, then the consumer purchase more goods at less price. So the demand curve slopes downward from left to right.
iii) Diminishing marginal utility:- As we consume more and more unit of particular commodity the intensity of want for that particular commodity decrease. Therefore, people purchase that commodity only when price reduce. When price reduces the demand curve slopes downward from left to right.
iv) New consumer:- When price is reduce, new consumers attracted for that particular commodity. Rich people can purchase more of a commodity even at high price but poor’s cannot be able to purchase that commodity at high price. As there is fall in price of a commodity. It becomes cheaper than new consumers purchase more. So, fall in price increases demand and demand curve slopes downward from left to right.
v) Different uses:- When price of composite demand falls, it will be used more for various purpose in different uses. For example, electricity, milk, etc. when the price of electricity fall, it will increase its use and so that the demand curve slopes downward from left to rights.
|
|
Did you find this answer useful?
Then Register Now to view other answers easily. |