What are the causes of downward sloping of demand curve?
Causes of downward sloping of demand curve.... We know that there is inverse relation between price and quantity demanded for a particular commodity. Therefore, demand increases when price decreases and the demand curve will be downward sloping. There are several factors which establish inverse relation between price and demand. They are as follows: 1. Law of diminishing marginal utility : The law of demand is based on the law of diminishing marginal utility. Therefore, demand increases when price decreases and the demand curve will be downward sloping. 2. Income effect : When price of a particular commodity decreases, the real income or purchasing power of consumer increases. As a result, demand increases when price decreases and the demand curve will be downward sloping. 3. Substitute effect: When price of a commodity decreases, it will become relatively cheaper than its substitutes. As a result, demand increases when price decreases and the demand curve will be downward s...