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The law of demand describes the inverse relationship between the price of a commodity and its quantity demanded, stating that higher prices lead to lower demand and vice versa. Factors affecting demand include consumer income, prices of related goods, tastes, future expectations, and exceptions like Giffen goods and the Veblen effect. A leftward shift of the demand curve indicates a decrease in demand at every price level due to factors such as decreased income, lower prices of substitutes, and unfavorable changes in consumer preferences.

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The law of demand describes the inverse relationship between the price of a commodity and its quantity demanded, stating that higher prices lead to lower demand and vice versa. Factors affecting demand include consumer income, prices of related goods, tastes, future expectations, and exceptions like Giffen goods and the Veblen effect. A leftward shift of the demand curve indicates a decrease in demand at every price level due to factors such as decreased income, lower prices of substitutes, and unfavorable changes in consumer preferences.

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masapnasharma
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Topic; Law of Demand:

Introduction: The law of demand is a fundamental principle in microeconomics that


describes the inverse relationship between the price of a commodity and its quantity
demanded.
Meaning: It states that when the price of a good rises, the quantity demanded falls, and
when the price falls, the quantity demanded rises, provided all other factors remain
constant (Ceteris Paribus).
Definition: According to Alfred Marshall, "The amount demanded increases with a
fall in price, and diminishes with a rise in price."
Demand Schedule:

Price Quantity Demanded


(Rs) (Units)

10 100

20 80

30 60

40 40

50 20

Demand Diagram:
Factors affecting Law of Demand:
(i) Price of the commodity: Primary factor causing movement along the curve.
(ii) Income of the consumer: Higher income usually increases demand for
normal goods.
(iii) Price of related goods: Demand is affected by prices of substitutes (e.g., tea
and coffee) and complements (e.g., car and petrol).
(iv) Tastes and preferences: Changes in fashion or habits shift demand.
(v) Future expectations: If prices are expected to rise in future, current demand
increases.
Exceptions to Law of Demand:
1. Giffen Goods: Inferior goods where demand falls even if price falls (e.g., coarse
grains).
2. Veblen Effect: Articles of distinction or luxury goods like diamonds where high
price indicates status.
3. Ignorance: Consumers may buy more at higher prices thinking it signifies better
quality.
4. Emergencies: During war or famine, people buy more regardless of high prices.
5. Speculation: If price rises and is expected to rise further, people buy more now.
Conclusion: The law of demand holds true under normal market conditions where the
price is the main determinant, though exceptions exist in specific economic scenarios.
Topic; Reasons for a Leftward Shift of Demand Curve
A leftward shift of the demand curve means that less quantity is demanded at every
price level.
Causes:
1. Decrease in Consumer Income
For normal goods, when income falls, demand decreases.
Decrease in the Price of Substitute Goods
If the price of a substitute good falls, consumers switch to that good, reducing demand
for the original good.
2. Increase in the Price of Complementary Goods
When the price of a complementary good rises, demand for the related good falls.
3. Unfavourable Change in Consumer Tastes and Preferences
If consumers no longer prefer a product, its demand decreases.
4. Expectation of Future Price Fall
If consumers expect prices to fall in the future, they postpone purchases, reducing
current demand.
5. Decrease in Population or Number of Buyers
Fewer consumers in the market lead to lower demand.
Conclusion:
A leftward shift of the demand curve indicates a decrease in demand due to changes in
factors other than the commodity’s own price. At every price level, consumers demand a
smaller quantity than before.

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