Tuesday, July 31, 2012

Class XI, Principles of Economics, "Law of Demand"

Introduction of Law of Demand

Demand depends on price. Demand is always at a price. At different prices different quantitities will be purchased. The law of demand states:

“Demand varies inversely with price not necessarily proportionally, it means that when price falls demand rises and vice versa.

It can also be stated in these words:

“A rise in the price of a commodity or service is followed by a reduction in demand and a fall in price is followed by increase in demand if conditions of demand remain constant.”

It can also be written in the words of S.T. Thomas as:

“At any given time the demand for the commodity or service at the prevailing price is greater than it would be at a higher price and less than it would be at higher price and less than it would be at lower price.”

There are several factors that cause change in demand e.g. changes in weather, fashion, taste, change in population etc.

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