# NEB Economics !! Law of Demand (Notes)

Jan 28, 2023

Law of Demand

The Neo-classical economist ,Alfred Marshall propounded the law of demand in the book “principle of economics” in 1990 .It is one of the well-known and most applied law in microeconomics . The law is based on the functional relationship between price and quantity demanded for the goods and services .

The law of demand states that of other things remaining the same , where price rises then quantity demand falls and vice-versa . Thus there is inverse relationship between price of commodity and quantity demanded of a commodity . If other things remaining the same symbolically it is written as following form

↓D=F(P)↑

and

Vice-versa

where, D =Demand

F= Function

P= Price

The law of demand is based on following assumptions

1. No change in income of the consumer
2. No change in consumers taste and preference
3. No change in price of complement and substitute goods
4. No change in technology
5. No change in size of production

Based on above table assumption , law of demand is explained by the following demand schedule

Table no. 1  Law of demand schedule

 Price of  commodity   (In Rs/kg) Quality demand (In Kg) 10 50 20 40 30 30 40 20 50 10

In the above table when price is Rs 10 then quantity demanded is 50 kg . Where price increase to 20 to 50 kg then quantity demand falls from 40 kg to 10 kg . In this table price of commodity and quantity demand has opposite relationship . Therefore the above table shows the law of demand .

In the above figure  x axis measures quantity demanded and Y axis measures price of commodity when price is Rs 50 quantity demanded in 10 kg and the when price is Rs 10 quantity demand is 50 .