Demand is a vital economic concept that works both at the market level and personal level. It also includes several concepts like law of demand, factors affecting it and eventually the impact of it on the economy at large. Therefore, it is essential for students to get this concept right from the very beginning as it will help to interpret the importance of the law of demand in economics.
However, to make things easier, learners need to delve into the core of this topic to score well.
What is The Law of Demand in Economics?
The law of demand in economics explains that when other factors remain constant, the quantity demand and price of any product or service show an inverse equation. It also means that whenever the value of a specific product increases, demand for the same declines; the exact opposite can also be observed. From this comes a concept of a demanding schedule.
This graphical representation shows that different quantities of product are demanded at varying prices. It thus calls a need for a law of demand graph to explain elaborately.
Analysis of Law of Demand
In order to run a business in a competitive market, it is essential to understand the law of demand definition economics. This law effectively indicates consumer choice behaviour. Moreover, there is a dedicated graph that shows this relationship and helps economists to take economic measures accordingly.
This concept is based on a natural customer choice behaviour. As a matter of fact, when the price of any good or service rises, demand for the same tends to fall as the consumers will not spend extra money on something than its standard price and will look for cheaper alternatives.
Moreover, often this question comes in examinations like “explain law of demand with diagram”. Therefore, it will be wiser to prepare the question beforehand to answer accurately.
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Image Text: Law of demand diagram
The above diagram contains a law of demand curve that is always downward sloping. It clearly shows that when the price increases from p2 to p1, the necessitated quantity decreases from Q2 to Q1.
Similarly, the law of demand in economics is an interesting chapter that also includes some related sub-topics like exceptions of this law and so on.
Law of Demand Exceptions
In a few cases, the law of demand in economics does not follow the rule. For instance, often it happens that the demand for a particular product rises along with the price. Therefore, it is vital to know about the exceptions as well to comprehend the law better and understand real-life incidents.
For a good of prestige, the demand almost remains the same even if the price increases.
Similarly, for necessary commodities as well, the demand rises due to its increasing consumption, despite the price rise.
This applies as well in case of Giffen goods.
These are some of the certain scenarios where the law deviates from its standard rendition.
Thus, to learn more about the law of demand in economics, download the Vedantu App and read vital notes on this topic. Moreover, they also offer various problems on this topic so that you can get a better grip on Economics.