Why demand curve falls or why demand curve has a Negative slope?
Why demand curve falls or why demand curve has a Negative slope?
There are three reasons.
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1. Income effect: Other things being equal when the price of a commodity decreases, the income or the purchasing power of the household increases. The consumer is now in a position to purchase more commodities with the same income. When at a lower price, there is a greater demand for a commodity by the households, the demand curve is bound to slope downward from left to right.
2. Substitution effect: If the price of some commodity say, Pepsi decreases and the price of its substitute remain same, people feel that this commodity is relatively cheaper, So they decrease the purchase of other cold drink, and buy more of Pepsi. This is called substitution effect. In that case, demand increases and the curve is bond to slopes downward.
3. Entry of new buyers: When the price of a commodity falls, its demand not only increases from the old buyers but the new buyers also enter the market. That’s why the demand curve slopes downward from left to right.
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Naeem Javid Muhammad Hassani is working as Conservator of Forests in Balochistan Forest & Wildlife Department (BFWD). He is the CEO of Tech Urdu (techurdu.net) Forestrypedia (forestrypedia.com), All Pak Notifications (allpaknotifications.com), Essayspedia, etc & their YouTube Channels). He is an Environmentalist, Blogger, YouTuber, Developer & Vlogger.