In economics, ‘demand‘ relates to the desire of people to purchase something and the willingness to pay for it. The law of demand explains the functional relationship between the price of a commodity and its demand. The most important tool that explains this relationship is the demand curve. This curve is always downward sloping due to an inverse relationship between price and demand.
The Law of Demand
Demand, in economic terms, basically means the desire to purchase something. However, the desire itself is not sufficient. It also requires the willingness and purchasing power of people to acquire the commodity.
According to the law of demand, when other factors are constant, there is an inverse relationship between price and demand. In other words, the demand for something increases as its price false. Conversely, demand reduces when the price increases.
We can understand this inverse relationship using the following individual demand schedule:
This schedule shows the individual demand for a commodity at various market prices. As we can observe, the demand is increasing as the price falls. This is because people will spend less money when prices are high. On the other hand, they will purchase more when prices are low.
From the demand schedule we have seen above, we can derive the following demand curve:
Downward Sloping of Demand Curve
This graph also shows the demand curve falling as the price reduces. The downward sloping of this curve explains the law of demand. Furthermore, its rightward shift with falling prices indicates increasing demand.
A similar market demand curve showing demands of various commodities of the same kind will also look the same. This indicates that a demand curve is always downward sloping. The extent to which a curve slopes might differ but its downward direction is inevitable.
Such downward sloping of demand curves from left to right explains the law of demand. This happens because of the inverse relationship between price and demand.