The law of demand is stated as “other things being equal, the quantity demanded increases with a fall in price and diminishes with a rise in price”. According to this law other things being equal, demand varies inversely with the price that is, at a higher price less will be demanded and at a lower price more will be demanded. 

Assumptions to the Law of Demand:

(i) Tastes and preferences of the consumer are the same regardless of the income group. 

(ii) All consumers have a fixed income and there is no change in income over a period of time.

(iii) Thirdly, the prices of the related goods do not change and they are fixed.

The law of demand states that, if all other factors remain equal, the higher the price of a good, the fewer people will demand that good. In other words, the higher the price, the lower the quantity demanded. The amount of a good that buyers purchase at a higher price is less because as the price of a good goes up, so does the opportunity cost of buying that good. As a result, people will naturally avoid buying a product that will force them to forgo the consumption of something else they value more.

Exceptions to the Law of Demand: 

Giffen goods: These are those inferior goods on which the consumer spends a large part of his income and the demand for which falls with a fall in their price.

Articles of snob appeal: Goods which serve status symbol do not follow the law of demand. These are goods of conspicuous consumption. These goods give their possessor utility in the sense of their ownership. Articles like diamond are purchased by the rich irrespective of their price hike as their possession is prestigious. When their price rises the prestige value goes up.