Why The Demand Curve Slopes Downward

The downward slope of the demand curve indicates that, other things being equal, a decrease in price will result in an increase in the quantity demanded of that product.

The logic behind this is that first, as price decreases more people can afford to purchase the product. Since lower income people out number higher income people, a falling price makes the product affordable for a greater number of people. At the same time, the higher income people can still afford the good or service at the lower price so they can continue buying it.

A second reason is that everyone has a finite amount of money. As the price of a good drops everyone can afford to purchase more with the money that they have. So, if I have $1 in my wallet and go to the candy machine and find that my favorite candy bar costs $1 I can only afford to buy one candy bar at that moment. However, if the price is only fifty cents, I can afford to purchase two of them at that moment.

Finally, since each of us has a finite amount of money at any given moment, we are forced to choose among the goods we want because we do not have enough money for everything we want at the moment. Thus, the lower the price of a good, the greater our ability to purchase that good and still have money left over for other things that we want or feel we need.


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