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Law of Demand

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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. 

Demand Schedule 

Price of X

Quantity Demanded 

P1

Q1

P2

Q2

P3

Q3

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. 

[Image will be uploaded soon]

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. 

Let’s discuss!


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. 

FAQ (Frequently Asked Questions)

1. What are the types of Demand? 

Ans. Demand in Economics refers to the number of consumers who are willing to purchase a product or service in a given period. There are generally 7 types of demand. A) Joint Demand, B) Composite Demand, C) Long-run and Short-run Demand, D) Income Demand, E) Price Demand, F) Competitive Demand and G) Direct and Derived Demand. 

Nevertheless, irrespective of the type of demand, it is intermingled with Supply. Both demand and supply determine the price of a particular product or service available in the market. 

2. What is the relationship between Demand and Supply? 

Ans. Demand and Supply are closely connected. In simple words, when the Supply of a particular good or service exceeds the demand, the price of the same falls. On the other hand, while this demand surpasses Supply, the price rises. 

Hence, Supply and price are inversely proportional when demand remains unchanged. Several economic theories work in line with this fundamental theory. 

3. What is the Demand Curve? 

Ans. The demand for a particular product mainly depends on its price and other factors such as preferences and income of consumers, the price of other products, etc. Moreover, in Economics, except the price, other factors are considered as fixed. Therefore, a curve is drawn on the basis of quantity and price that is known as a demand curve and the law associated with it is called the law of demand curve.  

The vertical axis represents price, whereas the horizontal axis represents a quantity. This curve is always downward sloping.