Law of Demand || Theory of Consumer Behavior || Bcis Notes

Law of Demand
Law of demand states that other things beings equal, demand for a commodity varies inversely with the price of the same commodity. This statement clearly states that there is an inverse relationship between the price of a commodity and the demand of the same commodity. As the price rises demand for the commodity will fall, as price falls demand for the commodity will rises. In other words, the higher the price, the lower the quantity demand of a commodity and vise-Versa.

Demand Schedule
The demand schedule is the tabular statement that represents the inverse relationship between the price of the commodity and the quantity demanded.

S.N	Price of a Commodity	Quantity Demanded
1. 2. 3. 4. 5.	5 10 15 20 25	25 20 15 10 5

 

Demand Curve
The demand curve is a graphical relationship between a commodity at different price levels and quantities that consumers are willing to buy. The curve can be derived from a demanding schedule, which is essentially a table view of the price and quantity pairings that comprise the demand curve.

Assumption of the Law
This law is based on the following assumptions:
1. No change in taste, preferences, and fashion of the consumer.
2. No change in the level of the income of the consumer.
3. The prices of related goods remain fixed.
4. The size of the population is fixed.
5. No change in advertisement expenditure.

Difference between movement and shift in the demand curve

Movement in demand curve or change in the quantity of demand	The shift in the demand curve or change in demand
This is due to the change in price determinant of demand.	This is due to change in other than price determinant of demand.
It holds ‘ceteris paribus’ assumption.	It doesn’t hold ‘ceteris paribus’ assumption. Here the price is constant.
No price effect.	Price effect is negative.
Types: -contraction -Expansion	Types:-Decrease -Increase
It can be shown by the single demand curve.	It can be shown by multiple demand curves.
Example:- Price	Example:- Income, Price of related goods, etc.

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