show the effect of demand curve of trouser when jeans becomes cheaper
Answers
What is the reason “why the demand curve slopes downward to the right"?
The first & foremost reason is the law of diminishing marginal utility… which states that as we consume more & more of a particular commodity.. the marginal utility( change in satisfaction) goes on decreasing.. thus.. the more quantity you would buy less satisfaction will be derived from the last unit purchased.. hence u will pay less for the last unit.. and will pay the highest for the first unit bought.. since the marginal utility derived from the first unit will be highest..!
The other reasons are income effect & substitution effect. These effects work hand in hand.. but we will explain it seperately for better understanding..
Income effect..
Suppose u measure ur income by the quantity of commodities u are able to purchase.. for example with a monthly income of Rs.5000 u can purchase a basket of 2shirts, 2 pants, 5kg rice,5kg wheat, 5kg vegetables, 2movie tickets, etc,etc… Now suppose due to certain reason the price of rice has fallen.. and due to which we can say that u can buy 6kg of rice with the same proportion of income( earlier u could buy 5kg only with the same proportion of income).. now if any outsider(who does not knows ur income but knows the quantity in ur basket) sees ur basket.. he/she can conclude that ur income has risen because he/she sees 6kg of rice instead of 5kg..but in reality ur income has not changed.. only the price of rice has fallen.. and due to which u were able to save some money. . and u decided to buy some more rice with that money.. This is called income effect. As price drops, our real income increases, and hence quantity demanded increases..
Substitution effect..
Again take the above example.. price of rice has fallen.. again u r having some extra money saved due to fall in the price of rice.. but the price of wheat remained unchanged.. u compared the prices of both the commodities.. and concluded that rice looks cheaper than wheat.. and hence decided to buy rice.
In both the cases u r deciding to buy rice more.. but with different logics.. Actually in reality.. both these effects occur hand in hand.. And hence demand increases as price falls..!
These were the major reasons why demand curve is downward sloping towards right..! :)