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Assumptions of the law:
Taste and Fashion of
Consumer
The
consumer must not develop a sudden disliking for the good he
usually purchased.
Income of a consumer
The
income of the consumer must remain constant for the law of
demand to hold. Let say if the income of the consumer falls and
the price of goods remain constant; the consumer will purchase
less of the good though price of goods doesn’t change.
Substitute prices
The
price of related goods remains constant.
Discovery of better
substitute
Discovery of better substitute are ignored while observing this
law
Expectation of price
change
The
consumer must not consider possible future changes in price of
products.
Exception/Limitation of the law:
High price products
(Superior Goods)
Superior goods like diamond; luxury cars do not follow law of
Demand. Even in the change in price doesn’t follow change in
Demand.
Low price products
(Inferior Goods)
Inferior goods like salt do not follow law of Demand. Even in
the change in price doesn’t follow change in Demand. |
