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Question
State the law of demand.
Solution 1
The law of demand states the inverse relationship between the price and quantity demanded of a commodity. According to this law, other things being equal, when the price of commodity increases, its demand falls and when price falls, demand increases. Note that, law of demand indicates only the 'direction' of change and not the 'magnitude' of change in demand. Further, there is no proportionate relationship between price and demand. If price of a commodity rises by 20%, its demand may fall by any proportion (i.e. by more or less than 20%). Law of demand, thus, is a qualitative concept as it does not indicate the magnitude of change in demand. It is important to note here that law of demand states the effect of change in price on demand and not the effect of change in demand on price.
- According to Marshall, "The amount demanded increases with a fall in price and diminishes with a rise in price."
- According to Bilas, "The law of demand states that other things being equal, the quantity demanded per unit of time will be greater, lower the price and smaller higher the price."
Solution 2
The law of demand states that, other things being equal, there is an inverse relation between change in price of a good and the consequent change in demand for that good.
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