What is Law of Demand?
The negative relationship between the price of a product and quantity demanded is referred to as the law of demand. It states that the lower the price of a product, the larger the quantity that will be demanded, other things being equal. A major reason for this to operate is that there is usually more than one product that will satisfy any given desire or need.
Hunger may be satisfied by meat or vegetables; a desire for green vegetables may be satisfied by broccoli or spinach. The need to keep warm at night may, be satisfied by woolen blankets, or one electric blanket, or a bed sheet and an efficient central heating system. The desire for a holiday may be satisfied by a trip to the Swiss Apps, the need to get there by an aeroplane, a bus, a car, or a train. Name any desire or need, and there will usually be several products that will contribute to its satisfaction.
If income, tastes, population, and the prices of all other products are held constant, and vary the price of only one product. Suppose, the price of the product rises. The product then becomes a more expensive way of satisfying a want. Some consumers will step buying it altogether : others will buy smaller amounts; but no rational customer will buy more of it. Because many consumers will switch, wholly or partially, to other products to satisfy the same want, less will be bought of the product whose price has resin.
Let the price of a product fall, it makes the product a cheaper method of satisfying any given want. Consumers will buy more of it and less of other similar products whose price have not fallen. These other products become expensive relative to the product in question.