What Is the Law of Demand
The law of demand clearly specifies the behavior of consumer. It is the nature of customers that they purchase more goods when the prices are less and will purchase fewer goods, if the price is more. These things were clearly explained by the law of demand.
Law of demand states that the relationship between the demand and prices go inversely proportional, when other things will be constant. Many other features such as income of the consumer, prices of the related goods, behavior of the consumers and all other things remain constant. But the demand for goods moves oppositely to the movement of prices.
This law of demand is very popular for the students of economics. There are some assumptions which are to be considered to confirm the law of demand working perfectly. Every law will have some limitations and exceptions. If the other conditions changes, this law will not work out. So it should be assumed that the tastes and incomes will not vary. The law operates in such conditions where the prices of commodities and all other prices will not change. Of all the assumptions, the main important notions are that people’s habits, fashions and likes will remain constant at all the times. The income and the money earned by the individuals also will not change. The prices of related goods also supposed to be constant on all the days. People should not expect rapid changes in the prices of goods.
In practical, there is vast importance for the law of demand. This is useful for determination of prices. The traders can fix the prices according to the demand of the commodity. He can analyse the rise and fall of demand for some commodities in accordance with prices of commodities. Total economy will have impact by this law. This is very important for the farmers also. If the crop fails, demand increases and thus prices can be hiked. Though there are some exceptions, law of demand helps to analyze the market.
Consumer behavior and his understanding mainly impact the demand of a product. The relationship between the price and quantity goes inverse. The total economy today is driven mainly by the consumers and not the producers. Though given importance, the value of a product depends up on the consideration of that product to the consumer. When consumers will not afford to buy at current market price, the trader must decrease its price, The main determinants of the demand are tastes of the consumers, income of the people, prices of relative goods, weather conditions, expectations of future and wealth. All these will fix the demand of a product. In mathematical expression, the formula for law of demand is Qx = f(Px) Where qz is the quantity demanded for x goods, f is the function of independent variables and px is the price of x goods. The two variables Px and Fx moves in opposite direction.