Question

reason for law of demand? ​

Answer 1

Reasons for Law of Demand. Substitution Effect: The Substitution effect is seen when the quantity demanded for one commodity changes due to the change in the price of other closely related commodity. ... Thus, the increase in demand due to the increase in the real income is called as the income effect.
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Answer 2

Reasons for law and demand-

1. Law of diminishing marginal utility - It states that as we consume more and more units of a commodity, the utility derived from each successive unit goes on decreasing. So, demand of a commodity depends on its utility. If the consumer gets more satisfaction, he will pay more.

2. Substitution effect - Substituting one commodity in place of other when it becomes relatively cheaper.

3. Income effect - It refers to effect on demand when real income of the consumer changes due to change in price of the given commodity.

4. Additional customers - When the price of a commodity falls, many new consumers, who were not in a position to buy it earlier due to its high price, starts purchasing it.

5. Different uses - Some commodities like milk, electricity, etc. have several uses, some of which are more important than others.When price of such a good increases, its uses get restricted to the most important purpose and demand for less important uses get reduced. However, when the price of such a commodity decreases, the commodity is put to all its uses, whether important or not.

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