Law of Demand and Changes in Demand
The law of demand states that, other things remaining same, the quantity demanded of a good increases when its price falls and vice-versa. Note that demand for goods changes as a consequence of changes in income, tastes etc. Hence, demand may expand or contract and increase or decrease. In this context, let us make a distinction between two different types of changes that affect quantity demanded, viz., expansion and contraction; and increase and decrease.
While stating the law of demand i.e., while treating price as the causative factor, the relevant terms are Expansion and Contraction in demand. When demand is changing due to a price change alone, we should not say increase or decrease but expansion or contraction. If one of the non-price determinants of demand, such as the prices of other goods, income, etc. change & thereby demand changes, the relevant terms are increase and decrease in demand. The expansion and contraction in demand are shown in the diagram. You may observe that expansion and contraction are shown on a single DD curve. The changes (movements) take place along the given curve k.
Read more about this topic: Law Of Demand
Famous quotes containing the words law of, law and/or demand:
“A crime persevered in a thousand centuries ceases to be a crime, and becomes a virtue. This is the law of custom, and custom supersedes all other forms of law.”
—Mark Twain [Samuel Langhorne Clemens] (1835–1910)
“The so-called law of induction cannot possibly be a law of logic, since it is obviously a proposition with a sense.—Nor, therefore, can it be an a priori law.”
—Ludwig Wittgenstein (1889–1951)
“I demand that my books be judged with utmost severity, by knowledgeable people who know the rules of grammar and of logic, and who will seek beneath the footsteps of my commas the lice of my thought in the head of my style.”
—Louis Aragon (1897–1982)