Hello everyone, in the previous topic we were talking about Demand, Its Types, and Factors Affecting Demand. Today we are going to talk about the Law of Demand, Demand Schedule, Demand Curve, and The Assumptions and Exception Of the law of Demand.

The Law of Demand

What is the law of demand?

The Law of Demand states that other things being equal, there is a negative relation between demand for a commodity and its price.

In other words, we can define it as, when the price of the commodity increases, demand for it falls and when the price of the commodity decreases, demand for it rises and other factors remain the same.

Or The Law of Demand expresses that when the cost of a commodity falls, there is an increment in its demand and when the cost of an item rises, its demand diminishes, while other things stay constant. In this way, there exists an inverse relationship between cost and quantity demanded of a commodity. The practical connection between cost and quantity demanded can be addressed as Dx = f(Px).

According to Prof. Samuelson, “The Law of Demand states that people will buy more at lower prices and buy less at higher prices if other things remain the same.”

 According to Prof. Marshall, “The Law of Demand states that the amount demanded increases with a fall in price and diminishes when price increases.”

According to Ferguson, “The law of demand, the quantity demanded varies inversely with price.”

According to Marshall, “The greater the amount to be sold the smaller must be the price”

According to Benham, “Usually, a larger quantity of commodity will be demanded at a lower price than a higher price”

Consumer Preference and Demand

The consumer inclination hypothesis assists us with understanding which mix of two products a customer will purchase dependent on available costs of the products and dependent upon a buyer’s financial plan limitation. What we are trying to know, is the measure of a decent a consumer really purchases. This is best clarified in Microeconomics utilizing the interesting work.

Derivation of Demand Curve

We realize that a consumer maximizes his satisfaction by picking a bundle of two products that additionally fall within his budget, through the IC analysis. We will utilize this to determine the demand curve for a product. Let us think about two commodities: X and Y. Let the costs of the two commodities be Px and Py and the money income is “M“. The consumer can expand his utility where his budget line is tangential to the indifference curve. Let this be point ‘E‘ in the graph. The quantity of X consumed is X1.

We now vary the price level of good X, keeping the cost of good Y and money income constant. Let Px fall. With the same money income, the genuine purchasing power of the consumer has actually expanded. The maximum amount of good X he can purchase increments as Px falls since “M” is unchanged. So, the horizontal intercept, of the budget line changes (movements to the right side). But, the vertical intercept is unchanged because “M” and Py are unchanged. Therefore, the budget line should pivot away from the beginning along the horizontal axis Px falls.

The new budget line is currently tangential to a higher IC at point ‘F‘. Here, the quantity of X consumed is X2, which is more than X1. In this way, at a lower cost of X, a greater quantity of it can be consumed. Again, let the Px fall further. The budget line pivot further away and the new point of tangency becomes G. The quantity of X consumed is X3.

Note in graph 1– That the demand curve slants downwards. This is on the grounds that as we continued to diminish the cost of X, the amount requested continued to increment. At a lower value, consumers have an all the more genuine pay to spend on buying a similar product so they can buy a greater amount of it. This leads to a negative connection between cost and quantity demand. This connection, in financial matters, is known as the Law of Demand. It expresses that ceteris paribus (taking everything into account), “As cost falls, the amount of demand increases vice-versa“

Demand Schedule and Demand Curve

The demand schedule is a table that shows the relationship between the price of the good and the quantity demanded and The demand curve is a graph of the relationship between the price of a good and the quantity demanded.

What is the Demand Schedule?

It is a statement as a table that shows the various amounts in demand at various costs. There are two parts of Demand Schedules:

• Individual Demand Schedule
• Market Demand Schedule

Demand Schedule

We get a Demand schedule which is given below-

Price of X	Quantity Demanded
P1	X1
P2	X2
P3	X3

Various amounts requested at different value levels are given in the table above. We can graph these combinations of cost and amount requested of X. The subsequent curve is the Demand Curve of X. It is a graphical representation of the various amounts of commodities at various costs.

Individual Demand Schedule

It is a demanding schedule that portrays the demand of an individual for a commodity in comparison to its cost. Let us understand it with the instance-

Price per unit of commodity X (Px)	Quantity demanded of commodity X (Dx)
100	50
200	40
300	30
400	20
500	10

The above schedule portrays the individual demand schedule. We can see that when the cost of the item is Rs. 100, its demand is 50 units. Essentially, when its cost is Rs. 500, its demand diminishes to 10 units.

Hence, we can reason that as the cost falls the demand increments, and as the cost raises the demand diminishes. Subsequently, there exists an inverse connection between the cost and the quantity demanded.

Market Demand Schedule

It is a summation of the individual demand schedules and portrays the demand of various customers for a commodity according to its cost. Let us understand with an instance.

Price per unit of commodity X	Quantity demanded by consumer A (QA)	Quantity demanded by consumer B (QB)	Market Demand              QA + QB
100	50	70	120
200	40	60	100
300	30	50	80
400	20	40	60
500	10	30	40

The above schedule shows the market demand for commodity X. At the point when the cost of the commodity is Rs. 100, customer A demands 50 units while customer B demands 70 units.

Along these, the market demand is 120 units. Also, when its cost is Rs. 500, Customer A demands 20 units while customer B demands 30 units.

Thus, its market demand diminishes to 40 units. Thus, we can reason that whether it is the individual demand or the market demand, the law of demand administers the two of them.

What is the Demand Curve?

In economics, a demand curve is a diagram portraying the connection between the cost of a specific commodity (the y-axis) and the quantity of that commodity that is demanded at that cost (the x-axis).

The demand curve can be utilized either at the cost-quantity relationship for an individual consumer or for all consumers in a specific market. the types of the demand curve are as follow-

• Individual demand curve
• Market demand curve

Individual Demand Curve

It is a graphical representation of the Individual demand schedule. The X-axis addresses the demand and the Y-axis addresses the cost of a commodity.

The above demand curve shows the demand for Gasoline. At the point when the cost of fuel is $3.5 per liter, its demand is 50 liters, and when the cost is $0.5 per liter, its demand is 250 liters.

Market Demand Curve

The market demand curve is the summation of all the individual demand curves in a given market. It shows the quantity demanded of the commodity by all people at different price value points.

To make it more straightforward to see the relationship, economists plot the market demand schedule into a graph, called the market demand curve. As a rule, the market demand curve is a downward slope, that is, as cost increases, demand decreases. The reverse of this is also true, as cost diminishes, demand increases. The job of somebody giving an item is to find the “perfect balance” on the demand curve: where price and demand are both ideal. The market demand curve can be utilized to find this point.

For instance, at $10/latte, the quantity demand by everybody in the market is 150 lattes each day. At $4/latte, the quantity demanded by everybody in the market is 1,000 lattes each day.

The market demand curve gives the quantity demanded by everybody in the market for each price point. The market demand curve is typically diagramed and downward sloping because as cost increases, the quantity demand decreases. It can likewise as a schedule, which is in the table form.

Assumptions under which law of demand is valid

This law will be applicable only if the below-mentioned points are fulfilled. If any of the assumptions are challenged the law of demand will become invalid.

• There should be no change in the price of related commodities.
• There should be no change in the income of the consumer.
• There should be no change in taste and preferences, customs, habits, etc.
• There should be no change in the size of the population.
• There should be no expectation regarding future changes in price.

Exceptions of the law of demand

Following are the Exceptions of the law of demand-

Inferior goods or Giffen goods

Some special types of inferior goods are known as Giffen goods. Cheaper varieties of goods like low-priced wheat and rice, low-priced bread, etc. are some examples of Giffen goods. This exception was pointed out by Robert Giffen who observed that when the price of bread increased, the low-paid workers purchased lesser quantities of bread, which is against the law of demand.

Hence, in the case of Giffen goods, there is an indirect relationship between price and quantity demanded.

Speculation

When people feel that a commodity is going to be scarce in the near future, they buy more of it even if there is a current rise in price. We are going to discuss this with an example- If the people feel that there will be a shortage of L.P.G. gas in the near future, they will buy more of it, even if the price of L.P.G is high.

Goods that have prestige value

This exception is associated with the name of the economist, T.Velben, and his doctrine of conspicuous conception. In our day-to-day life, few goods like the diamond or platinum can be purchased only by rich people. The prices of these goods are so high that they are beyond the capacity of common or poor people. The higher the price of the diamond the higher the prestige value it.

In this case, a consumer will buy less of the diamonds at a low price because with the fall in price, the prestige value of the diamond goes down. On the other side, when the price of diamonds increases, the prestige value of diamonds also goes up, and therefore, the quantity demanded of it will increase.

Change in income

The demand for goods and services is also affected by changes in the income of the consumers. If the income of consumers increases, they will demand more goods or services even at a higher price. On the other hand, if the income of consumers decreases, they will demand less quantity of goods or services even at a lower price. It is against the law of demand.

Price expectation

When the consumer expects that the price of the commodity is going to fall in the upcoming time, they do not buy more even if the price is lower. On the other side, when they expect a further rise in the price of the commodity, they will buy more even if the price is higher. Both of these conditions are against the law of demand.

Basic necessities of life

In the case of basic necessities of life such as salt, rice, bread, medicine, etc. The law of demand is not applicable as the demand for such necessary goods does not change with the rise or fall in price.

Change in fashion

The law of demand is not applicable when the goods are considered to be out of fashion. If the commodity goes out of fashion, people do not buy more even if the price falls.

For example– We are not going to purchase old-fashioned clothes like tops, jeans, shirts, etc nowadays even though they would become cheap.

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