Why people buy more when the price falls?
------------------------------------------

1.A unit of money goes farther and one can afford to buy more. He is willing and able to buy more because the thing being cheaper, his real income (i.e. income in terms of goods) increases. It is called Income Effect. For example, a person demands 2 lit milk at a price `30/lit. It means he spends `60 on milk. With the same amount of money he can buy 3 lit when price falls to `20/lit.

2.When the commodity becomes cheaper, it tends to be substituted wholly or partly for other commodities. This is called Substitution Effect. For example, a person demands 2 kg tomato and 2 kg brinjal every day (total 4 kg). If price of tomato falls (and price of brinjal remaining the same), he will buy more tomato say 3 kg and only 1 kg of brinjal (total 4 kg) to minimize his cost.

3.A commodity tends to be put to more uses or less urgent uses when it becomes cheaper. For example, additional qty of milk can be used for making sweets, ice-cream, etc.