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.