Slope of demand curve is negative, i.e. it falls from left to right which means less goods are brought or demanded at high prices and viceversa.
Negative slope of the demand curve is due to the following reasons:-
(1) Law of Diminishing Marginal Utility- Law of Demand is based on law of diminishing marginal utility.According to it, marginal Utility of a good diminishes as an individual consumers more units of goods.In other words, as a consumer takes more units of a goods, the extra utility or satisfaction that he derived from an extra law of diminishing marginal utility means that the total utility increases but at a decreasing rate.
(2) Increase in Purchasing power or Income effect- When price of a goods decreases, real income or purchasing power of consumer increases due to which he can maintain his previous level of consumption with less expenditure.In this way, at lower prices, more goods could be purchased.On the contrary consumer decreases due to which his consumption decreases.This kis the law of demand.
(3) Substitution Effect-Substitution effect is due to inverse relation between price and demand of a goods. Whenever there is a change in the relative prices of goods, a rational consumer will be induced to substitute the relatively dearer commodity by buying the cheaper one.Such effect of the change in relative prices of goods is thus, described as the substitution effect. Substitution effect is the change in quantity demanded of a commodity resulting from a charge in its price relative to the prices of other commodities, the consumer’* real income or satisfaction level being held constant.In this way, due to substitution effect, at low price, demand increases and at high price demand decreases.
(4) Change in consumer Number- Change in price also affects the number of consumers. When price decreases, the number of consumers increases as cheaper goods can be purchased by many consumers, i.e., even those consumers start purchasing goods which were not using it earlier due to high prices.On the contrary, when price increases, many consumers stop consumption or decrease it due to which demand decreases i.e., low price increases demand and high decreases it. This is the Law of Demands.
