What is law of demand ?

Question

Answer

Law of demand states that  other things being equal , when quantity demanded decrease with decrease of own price of commodity and vice versa.

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Law of demand when price increase then demand will be decrease and when price decrease then demand will be increase Dx=f(Px)

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Law of demand states that there is inverse relationship between price and quantity demanded assuming other factors affecting demand remains constant. . if price decreases demand increases and vice versa due to this demand curve slopes downwards from left to right .

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Law of demand states that there is a positive relationship between the income of the consumer and demand for the commodity as income increases demand increases and vice -verse but there is an inverse relationship between the price of the commodity demanded by the consumer and demand for it as price increases demand decreases and vice - versa.

Answer

Law of Demand:

The law of demand is a fundamental concept in economics that states there is an inverse relationship between the price of a product and the quantity demanded by consumers. In other words, as the price of a product increases, the quantity demanded decreases, and vice versa. This law is based on the observation that consumers tend to buy more of a product when its price is lower and less when its price is higher.

Explanation:

The law of demand can be explained by several key factors:

1. Substitution Effect:
When the price of a product increases, consumers tend to seek cheaper alternatives or substitutes. This is known as the substitution effect. For example, if the price of a particular brand of coffee increases, consumers may switch to a different brand or type of coffee that is more affordable.

2. Income Effect:
The income effect refers to the change in purchasing power that occurs due to a change in price. When the price of a product decreases, consumers may experience an increase in their real income, allowing them to purchase more goods and services. Conversely, when the price of a product increases, consumers may have to allocate more of their income towards purchasing that product, reducing their purchasing power for other goods and services.

3. Diminishing Marginal Utility:
The law of diminishing marginal utility suggests that as consumers consume more units of a product, the satisfaction or utility they derive from each additional unit decreases. Therefore, consumers are generally willing to pay a higher price for the first unit of a product but become less willing to pay the same price for subsequent units.

4. Market Demand Curve:
The law of demand is illustrated by the downward-sloping market demand curve. This curve represents the relationship between the price of a product and the quantity demanded by all consumers in the market. As the price decreases, the quantity demanded increases, resulting in a downward slope.

Summary:

In summary, the law of demand states that as the price of a product increases, the quantity demanded by consumers decreases, and as the price decreases, the quantity demanded increases. This inverse relationship is influenced by factors such as the substitution effect, income effect, diminishing marginal utility, and is visually represented by the downward-sloping market demand curve. Understanding the law of demand is crucial for businesses and policymakers in determining pricing strategies and forecasting consumer behavior.

Similar Commerce Doubts

“Petrol is becoming cheaper, yet the demand for cars is not rising”. Does it mean that the law of demand is not operative?

Law of demand is violated when.?

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