Basic Assumptions of Law of Demand| Find Best Note

Want to learn 'What are the Assumptions of Law of Demand?

If you are a student and know about the Law of Demand, then you are in right place. Here you will find an explanation of the law of demand with the help of a table and graph, and also find assumptions of the law of demand.

Basic Assumptions of Law of Demand Include

Assumptions of the Law of Demand state that ‘Other things remain unchanged’, i.e, assumptions of ceteris paribus order. Other things mean that the demand for a commodity depended not only on its price but also on many factors. These factors are as under:-

Tastes and preferences

Income of the consumer

Price of related goods (These included complementary goods and substitute goods)

Other factors affecting the demand are assumed to be either constant or unchanging

Assumptions of Law of Demand

The basic assumptions of the law of demand include:-

There should be no change in consumer income.

There should be no change in consumer tastes or preferences.

The price of the relevant goods must remain unchanged.

The commodity must be normal.

Population size must not change.

The income distribution must remain the same.

No price fluctuations are expected in the future.

What do you mean by Demand?

There are two types of people required for market transactions. That is, one is the buyer the other is the seller. Without these two parties, even a single transaction would not be possible. When we teach about demand, we only think about the buyer. You can see the decisions and reactions from the buyer, depending on the request. In demand, the main body from the seller's side is not included. In economics, the demand concept is well-defined by the law of demand.

What is the Law of Demand in Economics?

The Law of Demand states that the quantity demanded of goods increases when their price falls and decreases when their price rises, while the goods remain the same. The Law of Demand indicates the inverse relationship between the price and quantity demanded of a commodity. When the price increases, the demand decreases, and when the price decreases, the demand increases. Any requirement will be declared if the following three conditions exist:

Willingness to Buy. The first condition of the Law of Demand is a willingness to purchase the product. Those who want to buy are first considered ready to buy this product.

Ability to Buy. The second condition of the Law of Demand is the ability to buy. For example, I want to buy an airplane, but I don't have one. So this is my wish, not my request. Demand requires purchasing power.

Ready to Pay. The third condition of the Law of Demand is ready to pay. For example, if the above two conditions are met, he is willing and capable of buying, but also tells the customer that he must be ready to pay to buy a particular one. It is obligatory.

Law of Demand Table

The Law of Demand can be explained with the help of the following table.

Law of Demand

In table form, we can explain the Law of Demand. The price of commodity PX and Quantity purchased by the customer Qx. Here we see that slowly the price is decreasing, and on the other side, demand is increasing.

Law of Demand Graph

From the graph, it is clear that the price is moving down while quantity demand increases. That is why the demand curve always slows downward.

Law of Demand

The readings of the above table, are plotted on a Graph (Law of Demand Graph). Y-axis is taken as the price of the commodity, and the X-axis is taken as the quantity of the commodity.

Basic Assumptions of Law of Demand| Find Best Note