Introduction to the Law of

Demand

The law of demand states that as the price of a good or service

increases, the quantity demanded decreases. Learn how this
fundamental economic concept shapes consumer behavior and
markets.
The Graphical
Representation
Demand Curve
A downward sloping line that shows the relationship between price
and quantity demanded.
Shifts in Demand
Changes in factors such as income, consumer preferences, and
population can shift the entire demand curve.
Market Equilibrium
Occurs when the quantity demanded equals the quantity supplied,
resulting in a stable price and quantity.
 Factors Influencing
Demand

•Income: Higher income leads to increased

demand for normal goods.
•Price of Related Goods: Substitutes and
complementary goods affect demand.
•Consumer Preferences and Tastes:
Changing preferences can influence
demand patterns.
•Population and Demographics: Population
size and characteristics impact demand.
Elasticity of Demand

Price Elasticity
Measures the responsiveness of quantity
demanded to changes in price.
Income Elasticity
Shows how quantity demanded changes
with changes in consumer income.
Cross-Price Elasticity
Measures how the quantity demanded of
one good changes in response to a change
in the price of another good.
Real-world Examples

Price of Airline Tickets New Smartphone Gasoline Prices

The demand for airline Releases Consumers tend to
tickets is highly sensitive When a new smartphone adjust their demand for
to changes in price due to model is launched, the gasoline when prices
the wide availability of demand is often high as increase, exploring
substitutes and the cost- consumers rush to alternatives such as
conscious nature of upgrade their devices and carpooling or using
travelers. enjoy the latest features. public transportation.
Policy Implications

Price Controls Taxation Subsidy

Government-imposed Taxes can affect demand Subsidies can incentivize
price controls can by increasing the price of demand for specific goods or
distort market certain goods, which services by reducing their
equilibrium, leading to impacts consumer prices and making them more
shortages or surpluses. behavior and accessible to consumers.
market outcomes.