LAW OF DEMAND

Among the factors influencing demand for a commodity explained above, the most important factor is price of the commodity in question. Generally speaking, in almost all commodities, the quantity demanded of a commodity increases as the price of the commodity falls and vice versa, where price of other commodities, income of the consumer and tastes of the consumer remaining unchanged. The reason of this tendency will be explained below. This inverse relation between the quantity of the commodity and amount of money demanded is called the. ‘Law of Demand’. In short, the law of demand can thus be stated as follows: Other things remaining equal, there obtains inverse relationship between the price of a commodity and its quantity demanded.

The Demand Schedule

Let us use imaginary figures to show the application of the law of demand. Table 2.1 given below, showing the application of the law of demand, is called the ‘Demand Schedule

There are four combinations of price and quantity demanded shown in the Table 2.1. If we study this table, we can easily infer that as price of an apple is rising quantity demanded of apples on the part of the consumer is falling. Thus, the figures chosen are such that the law of demand is applicable.

The Demand Curve

 The demand curve states the relationship between the quantity of a good that consumers are willing to buy and the price of the good. Let us understand the demand curve with the help of the Fig. 2.4. In this figure, on the Y-axis, price of an apple in rupees in measured and on the X-axis the quantity demanded of apples per week on the part of a consumer is measured. The first combination  of Table 2.1 is shown by point a where at Rs. 100 per kg 15 units of apples are demanded. Similarly, points b, c, d represent combinations of Rs. 200 price – 12 quantities demanded, Rs. 300 price – 8 quantities demanded and Rs. 400 price – 3 quantities demanded, respectively. The joining together of points a, b, c, and d give us what is called the demand curve. Thus, DD is the demand curve.

• The most important feature of a demand curve is that it slopes downward from left to right. In Fig. 2.4 the demand curve has been shown as a straight line. But the demand curve need not always be a straight line.
• It can also be in the form of a curve as shown in Fig. 2.5. Whether a demand curve is a straight line or a curve depends on how much quantity demanded rises with the fall of its price or how much quantity demanded falls with the rise in the price of the commodity. Whether we take Fig. 2.4 or 2.5, in both the cases the law of demand is applicable.