Law of demand

The law of demand has been put forward by   Dr Alfred Marshall in his book “ Principles of economics ” published in 1890. According to by   Dr Alfred Marshall demand ie “  the desire backed by willingness and ability to pay “ tends to diminish with a rise in price and rise with a fall in price. Marshall has generalized in his statement of the law.

Statement of the law of demand

According to Dr Alfred Marshall   ”The law of demand states that the amount demanded increases with a fall in price and diminishes with a rise in price.” Or “ other things being constant ( ceteris paribus ) the higher the price of the commodity, smaller is the quantity demanded and lower the price of the commodity larger is the quantity demanded. ‘

This can be explained with the help of the individual demand schedule ie “a list of alternative amounts of a commodity purchased by a buyer at alternative or various prices at a given point of time. This is known as the individual demand schedule.” E.g. when the price is Re 1/- a consumer buys 5 chocolates and if the price   falls to Rs 4/- a consumer buys 2 chocolates

Individual demand schedule		Individual demand curve
Price  (Rs)	Quantity demanded
1	5
2	4
3	3
4	2
5	1

The diagrammatic representation of the individual demand schedule is the individual demand curve. i.e. “the  diagrammatic representation of the alternative amounts of a commodity purchased by a buyer at alternative or various prices at a point of time or a given period of time.”

The individual demand curve slopes downward from left to right indicating an inverse relation between price and quantity demanded.

In reality in the market there are many consumers. Consumers tend to buy more at a lower price and less at a higher price their demand in the market can be explained with the help of the market demand schedule ie “a list of alternative amounts of a commodity purchased by all buyer at an alternative price at a point of time or a given period of time.”

E.g. when the price of the commodity rises from Rs 3 to Rs 5/-some existing consumers buy less than before  i.e. A, B, and D buy 1 instead of 3, 2 instead of and 4 and 1  instead of 4. Some consumer’s  e.g.  “C” will leave the market. And when the price of the commodity falls from Rs 5/- to Rs 3/ some existing consumers buy more  than before  ie A, B, and D buy 3 instead of 1, 4 instead of2  and 4 instead of 1. Some consumers e.g.  “C” will enter the market. he will now buy 2.

The market demand curve slopes downward from left to right indicating an inverse relation between price and quantity demanded.The diagrammatic representation of the market demand schedule is the market demand curve. ie “the  diagrammatic representation of the alternative amounts of a commodity purchased by all buyers at alternative or various prices at a point of time or a given period of time.”

Therefore according to the law of demand, demand is an inverse function of price ie , ” Other things remaining constant, demand varies inversely with price.”

Dx = f (Px )  ————– ( inverse).

Here, price of the commodity plays an active role ie influences the consumer to buy more or less. Other factors affecting demand are assumed to play a passive role ie to remain constant. These are the assumptions of the law of demand.