Meaning: -The Law of demand establishes the functional
relationship between the Price of a commodity and the quantity of that
commodity demanded at different prices, assuming other factors remaining
constant.
When the price of a commodity rises, demand for it
falls and when the price of the commodity falls, demand rises. So less quantity
is demanded at higher prices and more quantity is demanded at lower prices.
There exist inverse relationship between price and quantity demanded of a
commodity.
Definition: -According to Marshall the
law of demand, is defined as “Other things being equal, the quantity of a
commodity demanded varies inversely with its price.”
Symbolically, the Law of demand can be
expressed as follows:
Dx = f (Px)
Where, D = stands for the demand for commodity X
X stands for the commodity demanded
F stands for function of
Px stands for the price of the commodity X
We can explain this law with the help of a
schedule and a diagram.
|
Price
(Rs.)
|
Quantity
Demanded
|
|
1
2
3
4
5
|
50
40
30
20
10
|
The Schedule shows that with an increase in Price the
quantity demanded is decreasing. It indicates inverse relationship between the
two variables price and quantity demanded. When the price is Re. 1 the consumer
demand 50 units and when the price rises to Rs. 5 he demands the least that is
10 units.
In the above diagram X-axis represents quantity
demanded and Y-axis represents price. Various points from the schedule are
plotted on the graph, joint those points we will be getting demand curve. DD is
the demand curve which slopes downward from left to right indicating inverse
relationship between price and Quantity demanded. This happens when the price
is more, demand is less and when price is less, and demand is more.
