Law of Demand

1. Demand

1.1 Law of Demand


A) Definition and Explanation of the Law:

 The demand for a goodness is related to determine per unit of time. It is the experience of all consumer that when the prices of the commodities fall, they are tempted to purchase more. Commodities and when the prices rise, the measuring rod demanded decreases. There is, thus, opposite word blood between the price of the product and the quantity demanded. The economists have named this inverse relationship between demand and price as the  law of nature of demand.
 
B) Statement of the Law: 

Other things being equal, the quantity demanded of a commodity summations with every fall in the price of the commodity and decreases with every rise in its price.
 
In elemental we can say that when the price of a commodity rises, slew subvert less of that commodity and when the price go, people buy more of it ceteris paribus (other things remaining the same). Or we can say that the quantity varies inversely with its price. There is no doubt that demand responds to price in the reverse direction but it has got no undifferentiated relation between them. If the price of a commodity falls by 1%, it is not necessary that may excessively increase by 1%. The demand can increase by 1%, 2%, 10%, 15%,  as the situation demands.





           
D) Assumptions of Law of Demand:
 
There are tercet main assumptions of the Law:
        
(i) There should not be some(prenominal) change in the tastes of the consumers for goods.
 
(ii) The purchasing power of the typical consumer moldiness remain constant.
 
(iii) The price of all other commodities should not vary.
 


E) subject of Law of Demand:
 
If there is a change, in the to a higher place and other assumptions, the law may not hold true. For example, correspond to the law of demand, other things being equal quantity demanded increases with a fall in price and diminishes with rise to price. Now let us suppose that price of tea comes down from $40 per pound to $20 per pound. The demand for tea may not...If you neediness to get a full essay, order it on our website: Orderessay



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