The law of demand states that all other factors remain constant or equal, an increase in the price causes a decrease in the quantity demanded and a decrease in goods or services price leads to increase in the quantity demanded. Thus it expresses an inverse relationship between price and demand.
For example, at Rs 70 per kg consumer may demand 2 kg of apple. On the other hand, the price rises to 100/- per kg then he may demand 1 kg of apple
Assumption of Law of Demand
- No change in the income
- No change in size population
- No change in price of related goods
- No change in consumers taste, preferences, etc
- No expectation of a price change in future
- No change in climate conditions
Given these assumption, the law of demand is explained in the below table –
The above table shows that when the price of apples is Rs. 10 per kg, 10 kg are demanded. If the price falls to Rs.8, the demand increases to 20 kg. Similarly, when the price declines to Rs 2, the demand increases to 50 kg. This indicates the inverse relation between price and demand.
Also, in the above figure the demand curve slopes downwards as the price decreases, the quantity demanded increases.