A demand curve is a graphical representation depicting the inverse relationship between the price and demand of a commodity keeping other things constant.
his inverse relationship implies that when the price of a good fall, the demand for that good rises, and when prices rise, demand falls keeping the effect of other variables like income, price of other goods, tastes, etc constant.
This relationship holds for most of the goods due to the income and substitution effect caused by a change in price. When the price of a good falls, purchasing power of an individual increases and hence he is able to purchase more (of the same and other goods) with the same income. This is called the income effect. The substitution effect is the influence of a reduction in a product’s price on the quantity demanded such that consumers are likely to substitute that good for others that have become relatively more expensive.
The law of demand does have a few exceptions, though:
1. Giffen Items - These are a particular class of inadequate goods whose demand declines when prices rise and vice versa. Consider the example of poor-quality dietary grains. Since consumers' purchasing power increases when the price of such grains lowers, they have a tendency to eat fewer of these inferior grains and instead choose to spend their higher real income on better goods.
2. Status symbol products - Items like diamonds, old paintings, etc. are sought after for their distinction and reputation. Since people prefer to place a higher value on expensive things, their demand rises when their price is high.
Does the demand curve always have a negative slope then?
No, not always, but most of the time for sure.
There are a select few items (Giffen items, status symbols, etc.) and specific circumstances (like the expectation of goods becoming scarce in near future, etc)
