The demand curve always slopes downwards from left to right. This is due to the fact that demand increases when price falls and decreases when price rises. There are several causes for the downward slope of the demand curve. They are mentioned as follows:
1. New buyers : When price is high, only a few people can buy a commodity. When price falls, people who could not buy up to now can also buy the commodity. A fall in the price of a commodity encourages new persons to buy it. As a result demand for it increases.
2. Income effect : Demand curve slopes downwards due to the income effect. When price of a commodity falls, the consumers get that commodity by paying less money. Their money is saved to some extent. As a result, they can get more units of the same commodity with the same amount. This is known as income effect.
3. Substitution effect: Substitution effect is another cause of the downward slope of the demand curve. Let us suppose that coffee and tea are substitutes. When the price of coffee rises, the demand for tea increases. People reduce the demand for coffee and buy tea as tea become relatively cheaper. The substitute tea for coffee.
4. Different uses : Demand curve slopes downwards because of the different uses of a commodity. Certain commodities like electricity, sugar, wheat etc. have different uses. For instance, electricity can be used for domestic lighting, for running business enterprises or for street lighting purposes. When the price of electricity is high, people use it for limited purposes only. If the price decreases, they use it for minimum purposes like heating water, cooking food etc. As a result, the demand for electricity increases to a great extent. Thus, the demand curve slope downwards from left to right due to the above mentioned reasons.
