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Question
Explain any four reasons for the demand curve to be downward sloping.
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Solution
Four reasons for the demand curve to be downward sloping are:1) Law of diminishing marginal utility: According to this law, as consumption increases the MU tends to decline.2) Income effect: Income effect refers to change in quantity demand when the real income of the buyer changes owing to change in price of the commodity.3) Substitution effect: It refers to substitution of one commodity for the other when it becomes relatively cheaper.4) Size of consumer group: When price of commodity falls, many more buyers can afford to buy it and accordingly demand expands.
Four reasons for the demand curve to be downward sloping are:
1) Law of diminishing marginal utility: According to this law, as consumption increases the MU tends to decline.
2) Income effect: Income effect refers to change in quantity demand when the real income of the buyer changes owing to change in price of the commodity.
3) Substitution effect: It refers to substitution of one commodity for the other when it becomes relatively cheaper.
4) Size of consumer group: When price of commodity falls, many more buyers can afford to buy it and accordingly demand expands.
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