Q:

Why would a demand curve have a downward slope?

A:

Quick Answer

The downward slope of a demand curve is due to consumers being less willing to purchase expensive products. As the price increases, potential consumers are likely to buy competing products. They may also refrain from purchasing a similar product.

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Full Answer

The cheaper a product, the more likely consumers are to buy it. In some cases, this is because consumers are simply unable to afford more expensive products. In other cases, consumers may purchase a less expensive competing product. Determining the demand curve for a particular product, however, is difficult. While surveys and market research can help, these tools are limited in their predictive power.

Food and other unavoidable products are always needed, so sellers must determine how much competitors are charging. For luxury items, on the other hand, buyers are more likely to skip making a purchase if the price is too high.

Before launching a product, companies determine which price point will generate the most revenue. Companies are willing to sell a product at a lower price if there is enough demand to justify a larger manufacturing run. Products cost less to make if a company can produce more, and larger sales can sometimes make up for a lower margin per sale.

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