Law of Demand - Economy UPSC notes
Law of Demand: As the price of a good or service increases, the quantity demanded decreases all other factors being equal.
The Law of Demand is a fundamental principle in economics that states: As the price of a good or service increases, the quantity demanded decreases all other factors being equal. Conversely, as the price of a good or service decreases, the quantity demanded increases , assuming all other factors remain unchanged. This negative or inverse relationship between price and quantity demanded is illustrated by the downward-sloping demand curve in a typical demand-supply graph. Explanation: Substitution Effect : When the price of a good rises, consumers may substitute it with a similar but cheaper alternative. For example, if the price of coffee increases, consumers might switch to tea, thus reducing the demand for coffee. Income Effect : When the price of a good rises, consumers' purchasing power decreases. As a result, they may buy less of the good because they cannot afford as much of it. For example, if the price of a car increases, people might decide to delay purchasing a new car or choose …