Law of Demand and its Application
Definition of Demand:
“Demand is the quantity of the good which a consumer is willing
to buy at the specific price in the given or proper time”
There are two basic elements or condition for
demand:
Will to purchase.
Power to purchase.
Definition:
“Demand is the relationship between price of a good and its
demand. The law explains that when the price of a good increases, the quantity
of its demand will decrease and on the other hand if price decreases, its
quantity demanded will increase with no change in other goods”
EXPALINATION OF TABLE
We see that when the price of a good (say a toffee),
is Rs:10, the demand for the good is 100 units. When price decreases to Rs.8,
its demand increases to 150 units. The price of the good continue to decrease
& reaches at Rs.2 and demand for it goes to 300 units increasingly.
It proves that if price decreases the demand for
that will increase and if price increase the demand for that good decrease.
EXPALINATION OF GRAPH
We may see that the demand curve DD is a negative
sloped verve which goes from left to right downwards and indicates the price of
the good is decreasing and the demand for the good is increasing at the same
time without any pause or break.
The price of the good decreases from Rs.10 to Rs.2
and demand for it reaches at 300 units from 100 units in the specific time proving
that the price of and demand for the good acts inversely.
Assumptions / Conditions of the law:
When assigning any law and applying this law, certain assumptions have to
be made. In the same way, some basic conditions have also been laid down for
the validity of the law of demand. ۔
All of these conditions are assumed to be static when describing the law of the
law. However, under normal circumstances and conditions, all these conditions
remain dynamic.
These are as under:
No change in
Income.
No change in population.
No change in price of substitutes.
No change in weather.
No change in Fashion or taste etc.
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