Demand Curve (Define, Why Is It Downward Sloping)
Definition:
The demand curve shows the amout that consumers are willing to buy given in a piticular market price.
Why It slopes Downward:
The curve has an invers relationship between price and quantity.
There are five reasons why the demand curve slopes downward.

  1. Substitution effect: When price of one product or falls, it becomes cheaper than another. This induces the consumer to substitute the productto whose price has fallen for another product, that has now become expensive. As a result of the substitution effect, the quantity demanded of the product/service, whose price has fallen, rises.
  2. Income effect: When the price of a product falls the consumer can buy more quantity with his given income. As a result of the fallen price, consumers real income or purchasing power increases. This increase induces the customer to buy more of the product.
  3. Number of Consumers: When the price of a product is high, fewer consumers can afford to buy it. When the price is low, more consumers can afford to buy the product.
  4. Various uses of the product or service.
  5. Law of diminishing marginal utility.
1."econ model," accessed January 13, 2012, http://www.econmodel.com/classic/terms/demand.htm
2."Wiki answers," accessed January 13, 2012, http://wiki.answers.com/Q/Why_does_the_demand_curve_slope_downwards