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The demand curve is downward sloping for 3 reasons: income effect, substitution effect, and the law of diminishing marginal utility.

  • Income effect - if a product's price falls, the purchasing power of a consumer will increase, and therefore, there will be greater quantity demanded at lower prices; the inverse (higher prices--->less quantity demanded) is also true.
  • Substitution effect - if the product price is lower, consumers will shift from purchasing a substitute (a similar product) to buying more of this particular product, therefore, the quantity demanded is higher at lower prices.
  • Diminishing MU - the more additional units a consumer buys of a good, the less marginal utility they receive from it (they are less happy with buying each new one). So to make them buy more of what they are already buying, you have to lower the price.
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โˆ™ 2011-03-27 03:54:05
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โˆ™ 2012-07-24 09:08:17

demand curve is downward sloping because there is always a downfall in every economy. it is concave from the origin.

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Q: Why is demand curve downward sloping?
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