The law of demand states that other thing
remaining equal, the quantity demanded of a commodity increases when its price
falls and decreases when its price rises.
The law indicates an inverse relationship between the price and quantity demanded of a commodity.
The law indicates an inverse relationship between the price and quantity demanded of a commodity.
The law
of demand is based on the following main assumptions:
1) There should be no change in income of the consumer.
2) There should be no change in tastes and preferences of the consumers.
3) Prices of the related commodities should remain unchanged.
4) Size of the population should not change.
5) The distribution of income should not change.
6) The commodity should be a
normal commodity.
Explanation of law of demand/Why demand curve
slope downwards to the right/why demand curve has a negative slope
1) Law of diminishing marginal utility :
This law states
that as consumption of a commodity increases, the utility from each successive
unit goes on diminishing. So for every additional unit to be purchase the
consumer is willing to pay less and less price.
Thus more is purchase only when own price of the commodity falls.
Thus more is purchase only when own price of the commodity falls.
Explanation
through example:
Units of shirt
|
Marginal utility
|
1
2
3
4
5
|
700
650
600
500
350
|
