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With the aid of at least one diagram and examples, explain why the demand curve for a normal good (define this term) is downward sloping.

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Introduction

´╗┐With the aid of at least one diagram and examples, explain why the demand curve for a normal good (define this term) is downward sloping. A demand curve shows the relationship between the quantities of a good consumers (or a consumer) are willing and able to buy during a particular time period, and their respective prices, ceterius paribus (all other things being equal). A normal good is a good for which the demand varies positively with income; this means that as income increases, demand for the good (Q1 to Q2) increases at every price level e.g. P1; a rightward shift of the demand curve of the commodity (D1 to D2). ...read more.

Middle

If you buy a third (Q3), you will get even less benefit than from the second (P3), and so on with each additional chocolate bar. The extra benefit that you get from each additional unit of something you buy is the marginal utility (marginal meaning extra or additional). Since each successive unit of chocolate you consume (Q1 to Q6) produces less and less utility (from P5 to P0), you will be willing to buy each extra unit only if it has a lower price. When the price of a normal good decreases relative to that of substitutes, a buyer will substitute the now cheaper commodity for those whose prices have not changed. ...read more.

Conclusion

With this increase in real income, the people will be likely to buy more of the product, hence there will be an increase in the quantity demanded (Q1 to Q2). Conversely, an increase in the price of the good reduces consumer? purchasing power. In conclusion, according to the law of demand there is a negative causal relationship between price of a normal good and its quantity demanded over a particular time period, ceterius paribus: as a price of a normal good increases, quantity demanded falls; as the price falls, quantity demanded increases, ceterius paribus. There is an inverse relationship between price and quantity. The higher the price of a normal good, the less of it you are able to buy; as the price falls, the good becomes more affordable, and you are likely to want and be able to buy more of it. ...read more.

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