When the price of the commodity falls, then the consumer replaces the object which has now become relatively dear, with other objects. If the price of tea falls, it will be used by some people in place of other beverages to some extent. The reason is not far to seek, when the price of a commodity falls, the consumer’s marginal utility for that commodity becomes comparatively high. Hence to increase his total satisfaction, he finds it worthwhile to purchase more of the cheaper commodity as against the dearer one. In contrast, when the price of a commodity rises, other commodities will be used in its place, at least to some extent. Therefore, a fall in the price of a commodity increases demand and a rise in its price reduces demand.
