Friday, February 20, 2009

Law of Demand

When price of a good goes up, people buy less of it and when prices goes down, people buy more it, other things being unchanged, it is called Law of Demand.

Prof. Alfred Marshall states the law of Demand as under:
“For the higher sale of the amount of a commodity, its price should fall or when the price falls, the quantity demanded increases and on the contrary, when the price rises, the demand falls provided other things remain the same.”

If different factor like consumer’s income, taste of the consumer, traditions, fashion, habits, prices of the substitute goods etc. will change, the Law of Demand will fail to operate.

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