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3 Cards in this Set

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  • Back

Assumptions of law of demand

1)no change in taste and preferences


2)the prices of other commodities related to the commodity in demand should not change.


3)no change in wealth of the consumer


4)consumers income both real and money should remain same.


5)no substitute


4)no anticipated change in price.

Demand curve sloped downwards:reasons for increase in demand

1)law of DMU


2)new consumer increases overall demand


3)income effect means prices fall real income increases demand


4) substitution effect-price of other goods


5)different uses of one commodity after the prices fall

Exceptions to law of demand.

1)giffen goods like bread bajra jowar rice.


2)material goods like gold jewllery silver.


3) expectations of change in price in future.


4)believing that low price means low quality and high price means superior quality.