The downward sloping nature of the demand curve is explained by three economic reasons I. e. the law of diminishing marginal utility, the substitution and the income effects.

1. Law of Diminishing Marginal Utility

                   The law states that the satisfaction a consumer gets from consuming an additional unit of good decreases as more and more of the good is consumed I. e. The marginal utility of good decreases as more and more of the good is consumed. This means that consumers will be willing to buy more of a good if the price falls.

This is because the good yields less and less satisfaction as more of it is bought. People's willingness to pay depends on the satisfaction they get. If satisfaction (MU) reduces, their willingness to pay also reduces. Consequently, more of a good is demanded at a lower price than at a higher price, making the demand curve to slope downward from left to right.

1. The substitution effect: The substitution effect explains the behavior of consumers when the price of a good falls or rises relative to the price of its substitutes. When the price of a good falls, consumers of that good find it cheaper than its substitute whose price remains unchanged. The tendency is that the consumers will buy more of it as the price has fallen. The fall in the price will also make it possible for those who, hitherto, could not afford the good to join in the purchase of the good. This increases the quantity demanded in response to the fallen price. On the other hand, when the price of the good rises, consumers will buy less of it as they switch over to cheaper substitutes. This again explains the inverse relationship between price and quantity demanded of a good as illustrated in the demand curve.

1. The Income Effect

                  The income effect also explains the behavior of the consumers from the point of view of changes in real income arising from changes in the price of a good. Given that there is a fall in the price of a good, ceteris paribus, the real income of the consumers will increase. This increases the purchasing power of the consumers enabling them to be able to buy more of it with the same amount of income. More consumers who could not afford to buy the good are now able to buy it. This increases the quantity demanded as the price of the good has fallen. This again explains the downward sloping demand curve from left to right.

CHANGES IN QUANTITY DEMANDED AND CHANGES IN DEMAND

A Change in Quantity Demanded

            A Change in quantity demanded is a movement along the same demand curve caused by a change in price only. A decrease in price will cause an increase in quantity demanded. This is known as an extension in demand. An increase demanded in price will cause a decrease in quantity demanded. This is called a contraction in demand. This is illustrated on figure below;

Movement from

     A - B = Extension in demand or an increase in quantity demanded

     A – C = Contraction in demand or a decrease in quantity demanded

An Increase in Demand

            This is a complete shift of the demand curve of a good to the right, with the price remaining unchanged. This means that more of a product is demanded at the same price. This increase is caused by the positive effects of factors that are responsible for an increase in people's desires to buy more of the good other than price. For instance, an increase in income of consumers, an increase in taste and fashion, a successful advertisement, an increase in family size, amongst others. An increase in any of these factors will shift the demand curve to the right.

         On the figure above the shift of the demand curve from DD to D₁ D₁ as shown by the arrow is called an increase in demand. This increases the quantity demanded from 20kg to 30kg at the same price

A Decrease in demand

          This is a complete shift of a demand curve of a good to the left, while the price of the good remains unchanged. This means that less of a product is demanded at the same price. This decrease is caused by unfavourable effects of factors that affect demand such as a fall in consumers’ income, a decrease in family size, unsuccessful advertisement, negative changes in taste and fashion, amongst others while price remain unchanged.

On the figure above the shift of the demand curve from DD to D₂ D₂ as shown by the arrow is called a decrease in demand. This leads to a decrease on the quantity demanded of the good from 20kg to 10kg at the same price level (500frs).