Why a demand curve has a negative slope?
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there are various causes of a demand curve having a negative slope:
1. Law of diminishing marginal utility (DMU)
According to the law, when a consumer consumes more and more units of a commodity, marginal utility (satisfaction) derived from additional minutes goes on decreasing.
It is also known as Price effect.
2. Income effect
It is the effect of change in quantity demanded when a real income (purchasing power) of a buyer changes due to change in price of the community.
3. Substitution effect
It refers to substitution of one commodity in place of other cognitive when it becomes relatively cheaper.
4. Size of consumer group or market size
Fall in price of a commodity leads to increase in the size of consumer group and accordingly more demand. Rise in price leads to fall in the size of consumer group causing less demand of the commodity.
5. Alternative uses of the commodity
If a commodity is highly priced, its use is restricted, implying less demand for it and when its price falls it is used in abundance, implying more demand for it e.g., a when electricity tariff is high its use is restricted employee class demand for it and vice versa.
1. Law of diminishing marginal utility (DMU)
According to the law, when a consumer consumes more and more units of a commodity, marginal utility (satisfaction) derived from additional minutes goes on decreasing.
It is also known as Price effect.
2. Income effect
It is the effect of change in quantity demanded when a real income (purchasing power) of a buyer changes due to change in price of the community.
3. Substitution effect
It refers to substitution of one commodity in place of other cognitive when it becomes relatively cheaper.
4. Size of consumer group or market size
Fall in price of a commodity leads to increase in the size of consumer group and accordingly more demand. Rise in price leads to fall in the size of consumer group causing less demand of the commodity.
5. Alternative uses of the commodity
If a commodity is highly priced, its use is restricted, implying less demand for it and when its price falls it is used in abundance, implying more demand for it e.g., a when electricity tariff is high its use is restricted employee class demand for it and vice versa.
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