Final answer:
Demand curves are downward-sloping mainly because of diminishing marginal utility, substitution effects, and the existence of substitute goods, which can vary between microeconomic and macroeconomic models. Indifference curves and the marginal rate of substitution also play a role in the downward slope seen in individual goods and services within microeconomic contexts.
Step-by-step explanation:
The three main reasons why demand curves are downward-sloping are due to diminishing marginal utility, income effect, and substitution effect. The downward slope suggests that as the price of a good falls, consumers are willing to buy more of it. This relationship is partly explained by the concept of diminishing marginal utility, which states that each additional unit of a good or service consumed provides less additional satisfaction than the previous one.
Furthermore, indifference curves, which represent combinations of goods that provide equal utility to a consumer, also explain the downward slope of the demand curve through the marginal rate of substitution. For example, if Lilly trades off a certain amount of one good for another while maintaining the same level of utility, the rate at which she's willing to substitute one good for another reflects the slope of the indifference curve, which is also the slope of the demand curve in microeconomic models.
On the macroeconomic level, the demand curve for individual goods or services slopes downwards primarily due to substitute goods. Aggregate demand curves in macroeconomic models, however, are influenced by wealth effects, interest rate, and foreign price effects.