Show that demand of a commodity is inversely related to its price.
Explain with the help of utility analysis.
Or
Why is an indifference curve negatively sloped? Explain.
The demand of a commodity is inversely related to its price, suppose a consumer consumes a good X and its price falls. in that case, the consumer will get a greater marginal utility by consuming good X than the other goods. Thus, he will increase the consumption of good X and its demand will increase. however, in case the price rises, the consumer will get lower utility from the consumption of good X and thus, he will reduce the demand for it.
| price of commodity X | demand of commodity of X |
| 10 | 100 |
| 15 | 50 |
| 20 | 25 |
| 25 | 15 |
This analysis of the above schedule shows that quantity demanded of a commodity holds a negative relationship with the price.
It shows that a higher price of quantity demanded of X falls and vice versa. as the price increases from Rs 10 to Rs 15, the quantity demanded falls from 100 units to 50 units.
