**1] A change in number of consumers – **

**a)** If Px rises then some existing consumers buy less and some who cannot afford to buy will leave the market therefore demand for X will fall.

**b)** If Px falls then some existing consumers buy more and some who can afford to buy will enter the market therefore demand for X will rise

Therefore, there is an inverse relation between demand and price.

**2] Relation between M. U. and price**:

Consumer is in equilibrium when M.Ux = Px. When consumer is not in equiibrium, M.Ux /= Px

**a)** If Px rises then M.Ux > Px, to reach equilibrium therefore the consumer will reduce demand

**b)** If Px falls then M.Ux < Px, to reach equilibrium therefore the consumer will increase demand

Therefore, there is an inverse relation between demand and price.

**3] Income effect**: Real income is the the purchasing capacity of money income. Higher the price, lower is the purchasing power of money, and lower the price greater the purchasing power of money

**a)** When price of a commodity rises, purchasing power reduces, hence demand falls.

**b)** When price of a commodity falls, purchasing power rises, hence demand rises.

Therefore, there is an inverse relation between demand and price.

**4] Substitution effect**; In case of presence of substitutes in the market (e.g. X, Y and Z are substitutes)

**a)** If Px rises, X becomes expensive as compared to Y and Z and then demand for the substitutes Y and Z increases leading to a fall in demand for X.

**b)** If Px decreases, X becomes cheaper compared to Y and Z then demand for substitutes Y and Z decrease s leading to rise in demand for X.

Therefore, there is an inverse relation between demand and price.