If you want to know the law of demand, then you have come to the right article, these questions are very useful from the exam point of view. In this article, we will understand the explanation of the law of demand, exceptions to the law of demand, characteristics, why the demand line curves down from left to right, etc. So without delay, let’s move forward.
What do you understand by law of demand?
When there is an increase in the price of a commodity (and other things remaining the same) then less quantity of that commodity is demanded or in other words, if more quantity of the commodity is available in the market then (among other things) the same quantity) can be sold only at a lower price.
Pro. In the words of Thomas:- At a given point of time, the demand for a good or service at the prevailing price is greater than the higher price and less than the lower price.
“At any given time the demand for a commodity or service at the prevailing price is greater than it would be at a higher price and less than it would be a at lover price.”
Pro. According to Marshall :- The quantity demanded increases with decrease in price and decreases with increase in price.
“The amount demanded increase with a fall in the price and diminishes with a rise in price.”
Explain the law of demand?
The relationship between the price of a commodity and its demand is known by the law of demand. The law of demand has an important place in every sector because this law makes it completely clear that if other things remain the same, then there will be a change in the price of a service or a commodity in the opposite condition, that is, the demand for that commodity or When the price of a service rises, the demand decreases and when the price falls, the demand for it increases.
The law of demand shows that demand changes in the opposite direction to price, but it is not necessary that the change in demand is proportional.
The various relationships found between the price of a commodity and its quantity demanded are known by the law of demand. If this law is expressed by the demand line, then the line will be falling from left to right.
What do you understand by monopoly?
Example – clear through picture
In the above figure D D1 is the demand line which is falling from left to right or downwards and makes it clear that when the price is PQ then the quantity demanded is OQ. If the price falls to P2 Q2, the demand will increase to OQ1 and OQ2 respectively.
Features of the law of demand
This rule has the following characteristics-
1. The law of demand explains the inverse relationship between the price and demand of a good or service at a given point in time. Price and demand have an inverse relationship.
2. The law of demand is a qualitative statement.
3. Price is independent and demands dependent.
Assumptions of the law of demand
The law of demand has the following assumptions which are given in the row below:
- There should be no change in the interest and nature of the individuals.
- The object should not be such that keeping or using it gives more prestige in society.
- Changes in the prices of commodities should not be expected in the future.
- No new material should be discovered.
- The demand of individuals should remain the same.
Write an exception to the law of demand. Can the demand curve rise from the bottom?
There are some situations in which the law of demand does not apply. There is no inverse relationship between price and demand, but there is a direct relationship i.e. demand increases when price increases and demand decreases when the price decreases.
In other words, in some cases, the demand lines tend to move upwards. These conditions are called exceptions to the law of demand. These exceptions are as follows-
Object out of fashion
If a commodity does not remain in fashion, then its demand does not increase even if the price of that commodity decreases.
very low price items
Goods whose prices are very low, even if their prices change, there is no effect on their demand, even if there is no effect. Things like matches, salt, needle,s etc. are examples of this category.
increase in population
Due to increase in population, the demand for the commodity increases even when the price increases. As today due to the increase in population in the country of India. (at the time of writing this post)
prestige items
Some rich class people buy certain items like diamonds, jewelry etc in higher quantity at higher price as they get a golden opportunity to showcase their wealth in doing so. They consider this as an indicator of increase in prestige. Therefore, when the price of those goods is high, such consumers start buying them in more quantity.
Items expected to be a rarity in the future
When, along with the increase in the price of a commodity, there is also a feeling among the people that the availability of that commodity will be difficult in the future, due to the tendency of hoarding among the consumers, the demand for the commodity will increase instead of decrease. begin to happen.
Ignorance of Consumers
Sometimes due to ignorance, consumers demand more (compared to goods at lower prices) at higher prices. The same thing is often found in the case of medicines. Due to the influence of other factors when the price falls, the demand does not increase.
Giffen’s paradox
Today’s economists consider this situation to be an exception to the law of demand. According to Giffin, when the price of inferior goods falls, their demand decreases instead of increasing. This is called Giffin’s paradox.
Why does the demand line curve downwards from left to right?
The law of demand states the inverse relationship between price and quantity demanded, so when it is represented as a demand line, the demand curve is sloping from left to right. Why does this happen or why is there an inverse relationship between price and demand? This can be explained by the following reasons-
1 Change in the number of buyers
When there is a fall in the price of a commodity, some other persons (who were not using that article till now) start buying that article. Thus the aggregate demand for the commodity increases. Due to this also the demand curve will tilt to the right.
2 Income Effect
When the price of a commodity falls, the real income of the consumers increases and as a result, they start demanding more of the commodity than before. Due to this the demand curve tilts downwards to the right.
3 Functionality of the Utility Depreciation Law
The law of demand is based on the depreciation law of utility. According to the law of diminishing utility, with the use of more units of a commodity, the utility obtained from each next unit gradually decreases. Generally, no consumer is ready to pay more for a commodity than its marginal utility.
4 Substitution Effect
If a commodity has a replacement good, then when the price of the commodity falls, that commodity becomes more price attractive than its substitute goods (whose price remains the same). Because of this, consumers start using it in place of other establishment goods. The demand for the commodity increases.