The Law of Demand is a central concept in Class 11 Economics, forming the base of consumer behaviour and market functioning. Whether you are preparing for school exams, class tests or board-level assessments, understanding the Law of Demand along with correct examples, diagrams, and explanations is extremely important. This blog simplifies the topic in an easy, exam-oriented manner while covering all major headings that teachers expect in answers.

Table of Content

The Law of Demand states that other things remaining constant, the quantity demanded of a goods increases when its price falls, and decreases when its price rises.

In simple words:

When price increases, people buy less.

When price decreases, people buy more.

This shows an inverse relationship between price and demand.

The law explains how consumers behave.

If something becomes expensive, we reduce consumption or switch to alternatives.

If something becomes cheaper, we buy more because it fits our budget better.

This logic applies to almost everything groceries, clothes, fuel, electronics, etc.

1. Inverse Relationship: Price and quantity demanded move in opposite directions.

2. Ceteris Paribus: All other factors (income, tastes, population) remain constant.

3. Only for Normal Goods: Works for goods that follow usual consumer behaviour.

4. Demand Curve Slopes Downward: Graphically shows the law.

5. Explains Consumer Preferences: Helps understand how buyers react to price changes.

6. Applicable to Market & Individuals: Works for both single buyers and total market demand.

There are three main reasons why demand falls when prices rise:

1️⃣ Substitution Effect

When the price of a good rises, consumers switch to substitutes.

E.g., if tea becomes expensive, people shift to coffee.

2️⃣ Income Effect

When price rises, your purchasing power falls — so you end up buying less.

3️⃣ Law of Diminishing Marginal Utility (Law of DMU)

Each additional unit gives less satisfaction, so consumers only buy more if the price is low.

Schedule & Diagram of Demand (Important for Exams)

Demand Schedule Example

Price (₹) Quantity Demanded (units)

50 10

40 15

30 20

20 28

10 35

As price falls from ₹50 → ₹10, demand rises from 10 units → 35 units.

The demand curve slopes downward from left to right, showing the inverse relation.

(Using the above table.)

The law holds true only if these conditions remain constant:

1. No change in consumer income

2. No change in tastes and preferences

3. No change in prices of related goods

4. No expectation of future price changes

5. No change in population size

6. No change in government policies

Some goods do not follow the law:

1️⃣ Giffen Goods

Very cheap inferior goods (like low-quality rice).

When price rises, poor households buy more.

2️⃣ Veblen Goods

Luxury goods like designer bags, sports cars.

Higher price increases demand because it shows status.

3️⃣ Future Expectations

If people expect prices to rise, they buy more today.

4️⃣ Necessities

Life-saving medicines: demand does not fall even if price rises.

1. Helps businesses decide how to price products

2. Guides the government in making economic policies

3. Helps consumers understand budgeting and choices

4. Forms the base for market demand analysis

5. Useful for predicting future sales and planning production

✔ Price ↑ Demand ↓

✔ Price ↓ Demand ↑

✔ Downward sloping demand curve

✔ Substitution + Income + Utility

✔ Exceptions

✔ One real-world example