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Question
Answer the following question:
Elaborate the law of demand, with the help of a hypothetical schedule.
Solution
According to the law of demand, a consumer’s demand shares an inverse relationship with the price of a good and vice-versa, ceteris paribus (other things being constant). In other words, if the income, price of related goods and a consumer’s tastes and preferences remain unchanged, then the demand of a good move opposite to the movement in the price of those goods.
Law of demand can be explained with the help of the following demand schedule.
|
Price of Commodity X(Rs) |
Quantity Demanded of X(units) |
| 5 | 100 |
| 10 | 75 |
| 15 | 50 |
| 20 | 25 |
The schedule shows that as the price of the commodity X increases from Rs 10 to Rs 15, the quantity demanded of X falls from 75 units to 50 units. Thus, there is a negative relationship between demand and price.
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