What happens when all the Bitcoin is mined? Will the demand for bitcoins decline then and people will shift to new coin ?
You have to remember, only new coins are generated from "Block rewards" via mining. Coins are still being added from people selling their coins. The Block reward will not expire in our life time, but it will be reduced every 4 years.
The supply will never go dry, because everyone has their selling price. The higher the demand and the lower the supply, will increase the price.