 The term demand for a product denotes quantity of it, a

consumer or group of consumers , are willing to purchase at a

given price , at a given time.
 Demand for a commodity refers to the desire backed by ability to
pay and willingness to buy it. If a person below poverty line wants
to buy a car, it is only a desire but not a demand as he cannot pay
for the car. If a rich man wants to buy a car, it is demand as he will
be able to pay for the car. Thus, desire backed by purchasing
power is demand.
 The demand for any commodity mainly depends on the price of
that commodity. The other determinants include price of related
commodities, the income of consumers, tastes and preferences of
consumers, and the wealth of consumers
 The Law of demand states that other factors
being constant(ceteris paribus) price & quantity
demanded of any commodity are inversely
related to each other. When the price of a
commodity rises, the demand for commodity
falls & vice versa.
 The law of demand explains how the consumers
behaviour changes when there is change in price
of a commodity.
 In a market situation, if other factors affecting
demand for a commodity does not change, but
only the price changes, then a consumer is likely
to buy more of a commodity when its price falls
and less of a commodity when its price rises.
 No change in consumer’s income
 No change in price of related goods
 No change in taste
 No change in size of population
 No uncertainty about future
 No change in advertisement
 No change in government policy
 No change in natural factors

 The law of demand , while explaining the

relationship between price & quantity demanded,
expects all other factors other than price to
remain constant
 The law of demand is not applicable in the
following cases

 Giffen goods
 Snob value
 Price expectations
 Emergencies
 Fashion
 Price
 Income
 Prices of related commodities
 Complementary commodities
 Taste & preferences
 Size & distribution of population
 Consumers expectation
 Expenditure on advertisement & promotion
 Cost of credit or interest rate
 Social factors
The demand function can be written as
 Dx = F (Px, Ps, Y, T, W)
where ,
Dx represents demand for good x
Px is price of good X
Ps is price of related goods Y is income
T refers to tastes and preferences of the
consumers
W refers to wealth of the consumer.