Laws of Demand & Supply Assignment Help
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Law of Demand
According to the law of demand, if the prices of a particular good increase while other factors remaining constant, the demand of that product will decrease. In simple words, there exists inverse relation between price and demand i.e. if price increases then there is a decrease in quantity demanded and vice-versa. Further, due to rise in price, consumers might lower their demand for that particular good and switch over to something that is
cheaper. For instance, if a consumer buys 5 kg tea at Rs50/- and suddenly the price rises to Rs75/- per kg then he/she will get only 3kg of tea at Rs50/-. So to overcome the price rise the consumer may migrate to different products which will give him/her same satisfaction as tea. For instance, coffee at comparatively lower price. This way due to rise in price of tea, its demand decreases.
In Fig 2.1 point A, B and C represent relation between Quantities demanded (Q) and price (P). To begin with, at point A, Quantity demanded is Q1 and price is P1. Moreover, at point B, the quantity demanded is Q2 and price is P2 and so on. This shows that with increase in price
Fig. 2.1 Law of Demand
From P1 to P3, the quantity demanded decreases from Q1 to Q3.
Law of Supply
According to the law of supply, a change in the price of a commodity leads to a change in its supply. In real sense, there exists a direct relation between price and supply i.e. when the price of a particular commodity increases then supply of the commodity also increases and vice –versa.
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