LAW OF DEMAND

The law of demand states an inverse relationship between price and quantity demanded. The Law of demand is given by ‘Alfred Marshall’ in his book principle of economics.

According to the law of demand ‘ higher a price lower will be the quantity demanded and lower a price higher will be the quantity demanded, being other things constant. 

ASSUMPTION:

1) Future expectations of prices are assumed constant.

2) Taste, preferences, and habits are assumed constant.

3) Population is assumed constant in the country.

4) There is no change in tax rates.

5) Income of consumer are assumed constant.

6) Prices of substitute goods and complementary goods are assumed constant.

7) There is no change in climate conditions.

 

DEMAND SCHEDULE:

price	Quantity demanded
4	1
3	2
2	3
1	4

 

DIAGRAM:

 

Explanation:

1) The X-axis represents the quantity demanded.

2) The Y-axis represents the price of a commodity.

3) As the price of commodities decreases from 4 to 3, the quantity demanded increases from 2 to 4.

4) Therefore law of demand explains the inverse relationship between price and demand.