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Question
Explain the inverse relationship between price and quantity demanded of a commodity.
Solution
The inverse relationship between price and quantity demanded of the commodity is explained by the Law of Demand. This law states that other things remaining constant, the demand of a good move opposite to the movement in the price of the good. This law can be explained with the help of the following demand schedule.
|
Price of X (Rs) |
Quantity Demanded of X (Units) |
|
7 |
50 |
|
8 |
45 |
|
9 |
42 |
|
10 |
38 |
|
11 |
35 |
In the schedule, we can analyse that as price of the commodity X increases from Rs 7 to Rs 8, the quantity demanded of X falls from 50 units to 45 units. This confirms the negative relationship between the quantity demanded and the price of the commodity.
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