Discuss the factors that affect the demand curve.

8.    There are some factors that affect the demand curve which are:

1. Law of diminishing marginal utility: For the effectiveness of the law of diminishing marginal utility demand curve is downward slopping to the right. According to the law, with the increase in consumption or purchase, marginal utility gradually diminishes. So consumer wants to give less price for extra unit of purchase.Thus we get inverse relation between p and Qd and demand curve is downward slopping to the right.

2. Income effect: Due to increase in price, consumer’s real income decreases and consumer will purchase less unit of goods and vice versa. So there establishes negative relation between p and Qd and demand curve is downward slopping.

 3. Substitution effect: If price of a substitute goods of consider goods decreases then substitute good will cheaper than before. So, consumer will purchase these cheap goods than other substitute goods .So there establishes negative relation between price (p) and quantity demanded (Qd) and demand curve is downward slopping.

 4. Price effect: If price of a good decreases then consumer will purchase more of that goods and new buyer also included to this demand .So total demand will increase due to reduction in price and there we get inverse relation between p and Qd and demand curve slopes downward to the right .