Q.State the Law of Demand.

Agree — the demand curve slopes downward from left to right because of the inverse (negative) relationship between price and quantity demanded stated by the law of demand.

Statement and reasons

The demand curve slopes downward from left to right because, other things constant, a fall in price increases quantity demanded and a rise in price reduces it — an inverse relationship. The main reasons are:

1. Law of diminishing marginal utility — as a consumer buys more units, the marginal utility of each extra unit falls, so he is willing to buy more only at a lower price.

2. Income effect — when the price of a good falls, the consumer's real income (purchasing power) rises, enabling him to buy more of that good.

3. Substitution effect — when a good becomes cheaper relative to its substitutes, consumers switch to it, raising its quantity demanded.

4. New buyers enter the market — a lower price brings in buyers who could not afford the good earlier, increasing total demand.

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Market demand = A + B + C at each price. The completed schedule is 30, 45, 60 and 75 kg at prices ₹35, ₹30, ₹25 and ₹20 respectively; plotting price (Y-axis) against market demand (X-axis) gives a downward-sloping market demand curve.

Completed market demand schedule