Question

Which one of the following is not an assumption in the law of demand?
A) There are no changes in the taste and preferences of consumers B) Income of consumers remains constant C) Consumers are affected by demonstration effect D) There are no changes in the price of substitute goods.

Answer 1

Explanation:

C)Consumers are affected by demonstration effect .

Answer 2

C)Consumers are affected by the demonstration effect is not an assumption in the law of demand.

Explanation:

The law of demand explains and states the inverse relationship between the price of the commodity and the quantity demanded.

• While considering the law there are some assumptions that need to be true for the law to work.
• Such one assumption of the law is no changes in the taste and fashion of the consumer.
• The income of the consumers should remain constant because if there's an increase in income the quantity demanded will still be high during higher prices.
• There should be no changes in the prices of substitute or complementary goods, the law will not work if any of these assumptions are not satisfied.

As we conclude all the options except for 'the consumers are affected by the demonstration effect' are the assumptions for the law of demand.