The demand curve slopes downwards because of the following reasons:
(i) Law of Diminishing Marginal Utility: According to this law, the utility derived from each successive unit of a commodity tends to diminish. Since Px = MUx, diminishing MUx, must mean diminishing Px corresponding to greater purchase of the commodity.
(ii) Income Effect: A fall in price of a commodity causes increase in real income of tire consumers. Accordingly, quantity demanded of the commodity increases.
(iii) Substitution Effect: When price of a commodity decreases in relation to the price of its substitute, its quantity demanded increases in place of the substitute goods.
(iv) Size of Consumer Group: When the price of a commodity falls, many consumers who were not buying it at its previous price begin to purchase it now.
