Q.Explain the 'law of demand' with its assumptions.
You're viewing a preview — the full solution, concept, methods & PYQ mapping are locked.
Start your 14-day free trial to unlock the full solution →Law of demand: other things constant, quantity demanded varies inversely with price; it rests on ceteris-paribus assumptions.
Statement (Marshall): "Other things remaining constant, the higher the price of a commodity, the smaller is the quantity demanded, and the lower the price, the larger is the quantity demanded." Thus price and quantity demanded move in opposite directions.
Demand schedule (illustration):
| Price of good (₹) | Quantity demanded (units) |
|---|---|
| 5 | 10 |
| 4 | 20 |
| 3 | 30 |
| 2 | 40 |
| 1 | 50 |
As price falls from 5 to 1, quantity demanded rises from 10 to 50, showing the inverse relation.
Demand curve: When plotted, the curve (DD) slopes downward from left to right, confirming the inverse price-quantity relationship.
Reasons for the downward slope: the law of diminishing marginal utility, the income effect (a price fall raises real income), the substitution effect (the cheaper good replaces others), new consumers entering, and multiple uses of a commodity.
Assumptions of the law of demand (other things constant):
- No change in the income of the consumer.
- No change in tastes, preferences, habits and fashion.
- No change in the prices of related goods (substitutes and complements). …
Unlock everything free for 14 days
- Full step-by-step solutions
- Concept-first explanations
- Methods, shortcuts & mistakes
- PYQ mapping + timed mock tests
Full access for 14 days. No credit card required.