Question

answer in brief state the law of demand . what are the assumptions of law of demand ...​

Answer 1

Answer:

LAW OF DEMAND:

The law of demand describes the relationship between the quantity demanded and the price of a product. It states that the demand for a product decreases with increase in its price and vice versa, while other factors are at constant.

Assumptions in Law of Demand:

The law of demand studies the change in demand with relation to change in price. In other words, the main assumption of law of demand is that it studies the effect of price on demand of a product, while keeping other determinants of demand at constant.

However there are certain assumptions underlying the law of demand, which are as follows:

i. Assumes that the consumer’s income remains same. If the income of an individual increases, the demand for products by him/her also increases, which is against the law of demand. Therefore, the income of consumer should not change.

ii. Assumes that the preferences of consumer remain same.

iii. Considers that the fashion does not show any changes, because if fashion changes, then people would not purchase the products that are out of fashion.

iv. Assumes that there would be no change in the age structure, size, and sex ratio of population. This is because if population size increases, then the number of buyers increases, which, in turn, affect the demand for a product directly.

v. Restricts the innovation and new varieties of products in the market, which can affect the demand for the existing product.

vi. Restricts changes in the distribution of income.

vii. Avoids any type of change fiscal policies of the government of a nation, which reduces the effect of taxation on the demand of product.

Apart from the aforementioned points, the law of demand assumes that the world is static and people consume products in the market at a fixed rate and price. These assumptions are not valid in the changing world.

Answer 2

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Mɑin ɑssumptions of the lɑw of demɑnd ɑre ɑs follows:

i. ) Prices of the relɑted goods do not chɑnge.

ii. ) Incomes of the consumers do not chɑnge.

iii.) Tɑstes ɑnd preferences of the consumers remɑin constɑnt.

iv. ) No expectɑtions of the consumer to ɑny chɑnge in the price of the commudity in the neɑr future.

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