In microeconomics, the law of demand states that, "conditional on all else being equal, as the price of a good increases (↑), quantity demanded decreases (↓); conversely, as the price of a good decreases (↓), quantity demanded increases (↑)".[1] In other words, the law of demand describes an inverse relationship between price and quantity demanded of a good. Alternatively, other things being constant, quantity demanded of a commodity is inversely related to the price of the commodity. For example, a consumer may demand 2 kilograms of apples at Rs 70 per kg; he may, however, demand 1 kg if the price rises to Rs 80 per kg. This has been the general human behaviour on relationship between the price of the commodity and the quantity demanded. The factors held constant refer to other determinants of demand, such as the prices of other goods and the consumer's income.[2] There are, however, some possible exceptions to the law of demand, such as Giffen goods and Veblen goods.
Mathematical expression Edit
Mathematically, the inverse relationship described by the law of demand may be expressed as:
{\displaystyle Q_{x}=f(P_{x};{\mathbf {Y}}),\quad \partial f/\partial P_{x}<0,} {\displaystyle Q_{x}=f(P_{x};{\mathbf {Y}}),\quad \partial f/\partial P_{x}<0,}
where {\displaystyle Q_{x}} Q_x is the quantity demanded of good {\displaystyle x} x, {\displaystyle P_{x}} P_x is the price of the good, {\displaystyle f} f is the demand function, {\displaystyle \partial f/\partial P_{x}} {\displaystyle \partial f/\partial P_{x}} is the partial derivative of the demand function with respect to {\displaystyle P_{x}} P_x, and {\displaystyle {\mathbf {Y}}} {\displaystyle {\mathbf {Y}}} is the list of other parameters held constant.[1]
The above equation, when plotted with quantity demanded ( {\displaystyle Q_{x}} Q_x) on the {\displaystyle x} x-axis and price ( {\displaystyle P_{x}} P_x) on the {\displaystyle y} y-axis, gives the demand curve, which is also known as the demand schedule. The downward sloping nature of a typical demand curve illustrates the inverse relationship between quantity demanded and price. Therefore, a downward sloping demand curve embeds the law of demand.
