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Why does the demand curve slopes downward?

Aston Martin Car Discussion

Why does the demand curve slopes downward?

Postby huxly11 » Mon Jan 07, 2013 12:44 pm

I know it's because of rationality of consumers, law of diminishing marginal utility, Income and substitution effect. n consumers buy more at lower price....

i need 5 more reasons!

n can u please suggest some sites where i can get help with Economics for A level?

thx
huxly11
 
Posts: 130
Joined: Thu Oct 04, 2012 3:27 am

Why does the demand curve slopes downward?

Postby talbott54 » Mon Jan 07, 2013 1:05 pm

Consider 2 variables - Price and Quantity.

Imagine that you are in the business of selling cars. A Ferrari is quite a specific item. It has a high price. The demand for these is quite low, since not many people can afford to run, let alone own such a thing. The same thing would go for an aston martin. So this would be in the top left section of your graph, where P = the y axis.

Fords, on the other hand, have much more market share. This is because they have a lower price. More people can afford to buy these and do. This would take up the bottom right position of your graph. You can then draw a line between these two points, giving you your line.

The supply line however takes a different course. Imagine that you are producing car parts. At a low price, there may not be many manufacturers wishing to produce such items, since the profits are low. However, as the price of items increases, more and more manufacturers will enter the market due to the increase in profits. that can be made. Do a low price will have little take up and will occupay a point on the bottom left. A high price will encourage higher production and will therefor occupy a position of top right.

However, supply and demand can effect each other. It is one thing for the price to be high, but that doesn't mean that many people want to buy at this price and so, lack of demand will force the price down (January sales). A low cost will encourage more people to buy and therefore encourage price rises as sellers adjust their prices to maximise profit.

The points where price = demand is where the two curves intersect at the point of equelibrium.

Luck
talbott54
 
Posts: 153
Joined: Thu Oct 11, 2012 6:20 am

Why does the demand curve slopes downward?

Postby stevyn » Mon Jan 07, 2013 1:09 pm

Consider 2 variables - Price and Quantity.

Imagine that you are in the business of selling cars. A Ferrari is quite a specific item. It has a high price. The demand for these is quite low, since not many people can afford to run, let alone own such a thing. The same thing would go for an aston martin. So this would be in the top left section of your graph, where P = the y axis.

Fords, on the other hand, have much more market share. This is because they have a lower price. More people can afford to buy these and do. This would take up the bottom right position of your graph. You can then draw a line between these two points, giving you your line.

The supply line however takes a different course. Imagine that you are producing car parts. At a low price, there may not be many manufacturers wishing to produce such items, since the profits are low. However, as the price of items increases, more and more manufacturers will enter the market due to the increase in profits. that can be made. Do a low price will have little take up and will occupay a point on the bottom left. A high price will encourage higher production and will therefor occupy a position of top right.

However, supply and demand can effect each other. It is one thing for the price to be high, but that doesn't mean that many people want to buy at this price and so, lack of demand will force the price down (January sales). A low cost will encourage more people to buy and therefore encourage price rises as sellers adjust their prices to maximise profit.

The points where price = demand is where the two curves intersect at the point of equelibrium.

Luck
I think you have answered your own question.
These are the precise reasons why the demand curve slope downwards.
Simply plot it on a graph to illustrate.
Here's a link i found for you...Hope it helps.

All the best to you
stevyn
 
Posts: 368
Joined: Mon Oct 10, 2011 2:25 pm


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