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Hence, if the price of tea reduces, its demand will increase and the demand curve will be downward sloping.

When the price of coffee rises, consumers may switch to buying tea more as it will become relatively cheaper.Įconomists refer to this as the substitution effect.

For example, many Indian consumers may substitute coffee and tea with each other for various reasons. 2) Substitution effectĬonsumers often classify various commodities as substitutes. This is why the demand curve slopes downwards. Hence, consumers will demand more goods when prices are less. Consequently, when the quantity is more, the prices will fall and demand will increase. The following are some of the causes explaining why demand curves always slope downwards: 1) The law of diminishing the marginal utilityĪccording to this principle, the marginal utility of a commodity reduces when the quantity of goods is more. Causes for Downward Sloping of Demand Curves This happens because of the inverse relationship between price and demand. Such downward sloping of demand curves from left to right explains the law of demand. The extent to which a curve slopes might differ but its downward direction is inevitable. This indicates that a demand curve is always downward sloping. Furthermore, its rightward shift with falling prices indicates increasing demand.Ī similar market demand curve showing demands of various commodities of the same kind will also look the same. The downward sloping of this curve explains the law of demand. This graph also shows the demand curve falling as the price reduces. Demand Curveįrom the demand schedule we have seen above, we can derive the following demand curve: On the other hand, they will purchase more when prices are low.

This is because people will spend less money when prices are high. As we can observe, the demand is increasing as the price falls. This schedule shows the individual demand for a commodity at various market prices. We can understand this inverse relationship using the following individual demand schedule: Price

Conversely, demand reduces when the price increases. In other words, the demand for something increases as its price false. It also requires the willingness and purchasing power of people to acquire the commodity.Īccording to the law of demand, when other factors are constant, there is an inverse relationship between price and demand. However, the desire itself is not sufficient. Demand, in economic terms, basically means the desire to purchase something.