Explain the Law of demand with diagram. |
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| Ans : The law of demand state the relationship between price of commodity and it’s quantity demand. According to law of demand,
Higher the price lower the demand
Lower the price higher the demand
It means when there is fall in price there is increase in demand and when there is increase in demand and when there is increase in prices then there is decrease in demand. There is negative relationship between price and quantity demand.
According to Marshall, “other things remaining same, the amount demanded increases with fall in price and diminishes with a rise in price.”
# Assumption of law of demand
Ans:- The law of demand is based on following assumption:
i) No change in income of the consumer.
ii) No change in price of related goods.(substitute goods and complementary goods)
iii) No change in habit of consumer.
iv) No change in taste and fashion of consumer.
v) No change in climate and season.
vi) No expectation of change in price in future.
vii) No change in size of population.
The law of demand can be explained with the help of schedule and diagram:
Demand schedule
A demand schedule is a table that shows various quantities of commodities that the consumer is able and willing to purchase at various prices at a particular time and place.
Price in(Rs.) Quantity demand in (unit)
12
10
10
20
8
30
6
40
4
50
2
60
In this above table it is clear that there is negative relationship between price and quantity demand. At initial price Rs. 12 quantity demand is 10 units. When price decreases to Rs. 10 quantity demand increases to 20 units. Again when price decreases to Rs. 8 quantity demand increases to 30 units and so on. It can be explained by a diagram:
In the above diagram, ox -axis represent quantity demand and oy-axis represent price of commodity. Let the initial price be Rs.12 and quantity demand is 10 units. When price decreases to Rs.10, quantity demand increases to 10 units. Again when price decreases to Rs.8 then quantity demand increases to 30 units and so on. DD is the demand curve which slopes downward from left to right. It shows that there is negative relationship between price and quantity demand.
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