What is the law of demand? Give an example.

In one line

The rule

The Law of Demand states that, all else being equal, as the price of a good or service decreases, the quantity demanded increases, and vice versa. This inverse relationship between price and quantity demanded is fundamental in economics.

Formula: Qd = f(P)

• Qd: Quantity demanded
• P: Price
• f(P): means "depends on price"

Let's understand it simply

Imagine you go to the market to buy mangoes. If mangoes are ₹100 per kg, you might buy just 1 kg. But if the price drops to ₹50 per kg, you may buy 2 or even 3 kg. Why? Because you feel you are getting more for your money. This is the law of demand in action: as the price falls, you want to buy more.

Think of a cricket match ticket. If the ticket is ₹2000, only a few people will buy. If the price drops to ₹500, the stadium will fill up. Lower price = more buyers.

How it works

1. The price of a good changes (for example, apples go from ₹100 to ₹80 per kg).
2. People notice the new price.
3. At a lower price, people can afford to buy more, or they feel it is a better deal.
4. Some people who could not buy before can now buy.
5. The total quantity bought (demanded) increases as price falls. If price rises, the opposite happens.

The story behind it

The law of demand is one of the oldest ideas in economics. Economists like Alfred Marshall (late 1800s, England) wrote about it in his famous book, "Principles of Economics." He noticed that people act differently when prices change, and wanted to explain why markets work the way they do. The law of demand helps us understand how buyers behave, and why prices matter so much in a market.

Where you see it in real life

• Vegetable market: If tomatoes become cheap in the monsoon, people buy more and make more curry or chutney.
• Mobile phones: When a new phone model's price drops after a few months, more students and families buy it.
• Bus tickets: If the city bus fare is reduced, more people choose to travel by bus instead of autos.
• Clothing sales: During Diwali sales, shops offer discounts. More people buy clothes because the price is lower.
• Movie tickets: Cheaper morning shows have more people than expensive evening shows.
• Pressure cookers: If the price of a pressure cooker falls, more households buy one, even in villages.

Why it matters

• Helps businesses set prices: Shops and companies use the law of demand to decide how much to charge.
• Government policies: When the government sets prices (like for rice or petrol), it must think about how demand will change.
• Market predictions: Economists use this law to guess what will happen if prices change.
• Exams and jobs: This is a basic idea in economics, used in higher studies, banking, and business exams.

Worked example

Let's use the apple example from your book:

Given: Price of apples falls from ₹100 to ₹80 per kg.
         Quantity demanded rises from 50 kg to 70 kg.
Step 1: Note the price change: ₹100 → ₹80 (decrease)
Step 2: Note the demand change: 50 kg → 70 kg (increase)
Step 3: This matches the law of demand: price down, demand up.

Common mistakes

• Thinking demand always increases: Demand only increases if price falls (other things must stay the same).
• Confusing demand with quantity demanded: 'Demand' means the whole relationship; 'quantity demanded' is the amount at a specific price.
• Forgetting 'all else equal': The law works only if other things (like income, taste, price of other goods) do not change.
• Assuming it works for all goods: Some rare goods (like medicines or Giffen goods) may not follow this law.

Remember it

"Price up, demand down. Price down, demand up."

Or: "Cheaper things sell more."