Show that price and demand of a commodity are inversely related? Use utility analysis.

In utility analysis a consumer is in equilibrium, assuming he consumes only two goods X and Y, when

Mux/Px = MUy/Py

Now suppose Px falls. It makes

Mux/Px > MUy/Py

Since per rupee Mux is greater than per rupee Muy, the consumer will buy more of X. It shows inverse relation between price of X and demand of X.

A consumer buys a goods upto the point where,

Price = MU

Now suppose price falls, it makes,

Price < MU

Since price is lower than MU, this induces the consumer to buy more units of the good. It shows inverse relation between price and demand.