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Answer» Law of demand: - The principle that explains the relationship between price and demand for a good, assuming the effect of all other determinants as constant is called the ‘Law of Demand’.
- This law was given by Prof. Alfred Marshall As per him “When other factors influencing demand remain unchanged, if price of a good falls, its demand expands and if price of a good rises, its demand contracts.”
- Thus, the law expresses an inverse relationship between price and demand.
- In this law, ‘price’ is the cause variable and demand is the effect variable.
Assumptions of law of demand: - Tastes and preferences of the consumer remain unchanged.
- Income of consumer remains unchanged.
- Price of substitute and complementary goods remain unchanged.
- Consumers do not make anticipation regarding future prices.
- Size of population remains the same.
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