Every other person is running on demand right now. The same is happening with the products. Most of us are waiting for the sale online to get the outcomes we wanted at the lower cost. For example, a mobile phone cost around 520$ at the starting and when the sale came to the same mobile phone is costing around 300$. Therefore, the fall of the price increases the demand. Check Law of Demand Statement Formula, Assumptions and Example below.
However, In another situation, the starting price of a mobile phone was 520$, and the demand for the product was very less that time. In simple words, the cost of the product and the demand is interrelated with each other.
Law of Demand Statement:
The well-known professor’s statements are:
According to Prof. Samuelson:
“The law of demand states that people will buy more at lower prices and buy less at higher prices, other things remaining the same.”
- Miller writes:
“Other things remaining the same, the quantity demanded of a commodity will be smaller at higher market prices and larger at lower market prices.”
“Other things remaining the same, the quantity demanded increases with every fall in the price and decreases with every rise in the price.”
From this, It is clear that cost somehow related to demand. Example, if the product prices fall the demand for the product is automatically increased, and if the price is up, then the demand for the product is automatically decreased.
Qdx = f (Px, M, Po, T,……….)
Qdx = A quantity demanded of commodity x.
f = A function of independent variables contained within the parenthesis.
Px = Price of commodity x.
Po = Price of the other commodities.
T = Taste of the household.
There are three main assumptions for the law of demand and which are:
- There is not any chance for the customer.
- It will remain constant.
- Prices should vary.
Law of Demand Example:
If the assumptions are true, then let’s suppose an example of tea comes down from 40$ to 20$, but there is also a significant change in individual earnings. It means the demand for the drink is the same as previous. However, It is possible if one of the things remains constant. That’s the reasons assumptions made by Prof. Stigler, and Boulding is accurate.
There is some importance to holding the law of demand and its application. The study of demand is useful for the traders to fix a better price in commodity to beat the market competitions by acquiring fewer profits.
The secondary importance to study the law of demand is for finance minister. It helps with the management of tax raise and other financial issues. For example, if the tax raised, then the need for anything would automatically decrease.
It is also essential for farmers. Let’s suppose if the sell of the crop does not happen, then the crop price will automatically increase. Hence, the demand will decrease.
The law of demand carries its value in terms of getting anything viral. The study for the law of demand is essential for every individual to know the importance of price that how it affects the needs of people and the market.