What is the law of demand?

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.

The formula is: Qd = f(P)

• Qd = quantity demanded
• P = price
• f(P) = function of price (shows that demand depends on price)

Let's understand it simply

Imagine you go to the market to buy mangoes. If the price is ₹100 per kg, you might buy only 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.

Think of it like a cricket stadium ticket. If tickets are very expensive, fewer people will come to watch. If tickets are cheap, the stadium will be full. People want more when things cost less.

How it works

1. Price changes: The shopkeeper changes the price of a good (for example, apples).
2. People react: If the price goes up, some people stop buying or buy less. If the price goes down, more people want to buy.
3. Quantity demanded changes: The total amount people want to buy changes in the opposite direction to the price.
4. Other things stay the same: This rule works only if other things (like income, taste, prices of other goods) do not change.
5. Inverse relationship: The higher the price, the lower the demand; the lower the price, the higher the demand.

The story behind it

The law of demand is a basic idea in economics. Economists noticed this pattern for hundreds of years, but it was clearly written down in the late 19th century by economists like Alfred Marshall in England. He wanted to explain how prices and quantities are set in markets. Marshall drew the first demand curves, showing this relationship on a graph.

Where you see it in real life

• Vegetable market: If tomatoes become cheap during the monsoon, families buy more and make more dishes with them.
• Mobile recharge offers: When a company gives a discount on data packs, more people recharge their phones.
• Bus fares: If the local bus fare increases, some people may start walking or cycling instead.
• Diwali sweets: When the price of laddus drops after Diwali, more people buy them for home.
• Movie tickets: Cheaper tickets on weekdays fill more seats in the cinema hall.
• Online sales: When there is a big sale on a shopping app, the number of orders goes up sharply.

Why it matters

• Helps set prices: Shopkeepers and companies use this rule to decide how much to charge.
• Government policies: The government uses it to predict what will happen if they tax or subsidize a good.
• Market planning: Farmers, factories, and traders plan how much to produce based on expected demand.
• Foundation for other topics: Later chapters like supply, equilibrium price, and elasticity all build on this law.

Worked example

Let’s use the apple example from the NCERT context.

Given: Price drops from ₹100 to ₹80, Quantity demanded rises from 50 kg to 70 kg
Step 1: Note the price change: ₹100 → ₹80 (price decreases)
Step 2: Note the demand change: 50 kg → 70 kg (demand increases)
Step 3: This matches the law: as price falls, demand rises

Common mistakes

• Thinking demand always means 'wanting': In economics, demand means wanting AND being able to buy at a price.
• Forgetting 'other things equal': The law works only if income, taste, and other goods’ prices do not change.
• Confusing demand with quantity demanded: 'Demand' is the whole relationship; 'quantity demanded' is the amount at one price.
• Believing it applies to all goods: Some rare goods (like medicines, or luxury status items) may not follow this law.

Remember it

When price goes up, demand goes down — like a see-saw: one side up, the other down.