A fundamental characteristic of demand is this: Ceteris paribus (All else equal), as price falls, the quantity demanded rises, and as price rises, the quantity demanded falls. In short, there is a negative or inverse relationship between price and quantity demanded. Economists call this inverse relationship the law of demand. The other-things-equal assumption means that anything that affects demand other than price like income or taste of consumer will not change.
Law of demand is
illustrated below with the help of schedule and figure.
Let, QD = 22 - 2P where, QD is quantity of demand
and P is price.
|
Demand schedule |
|
|
Price (P) |
Demand (QD) |
|
4 |
14 |
|
5 |
12 |
|
6 |
10 |
In the schedule we
can see the inverse relationship between price and quantity of demand which is
shown in figure by negative sloped demand curve.