Question

Explain the law of demand

Short answer

States that there exists an inverse relationship between quantity demanded and price of the good.

Step-by-step solution

Step1. Introduction

The law of demand is one of the basic and fundamental laws in the field of economics. It is very basic and is widely studied, used, and actually observed in the real market.

Step2. Explanation

The law of demand is one of the most fundamental law of economics, which states and explains that there exists an inverse relationship, otherwise called as negative relationship between the quantity demanded by a consumer/ buyer and price of a normal good. When the price of the commodity increases, the quantity demanded decreases and vice versa. This law is universal and is widely observed and practiced in real world.

Say for eg. if I am currently purchasing 10 tomatoes for Rs 100, i.e. Rs 10 for 1 tomato. Now let's say the price drops to Rs 5, the tomatoes become relatively cheaper. For Rs 100, I can now purchase 20 tomatoes. Therefore, the demand will increase as the price falls and vice versa

Although, the law may not be applicable to all goods but normal only. Products like medicines which are a necessity goods may not follow the law of demand.