The law of demand is a fundamental principle in economics that describes the relationship between the price of a good or service and the quantity demanded by consumers. It states that, assuming all other factors remain constant, when the price of a good or service rises, the quantity demanded of that good or service decreases. Conversely, when the price falls, the quantity demanded increases.
The relationship described by the law of demand is typically illustrated on a demand curve. The demand curve slopes downward from left to right, indicating that as price decreases, the quantity demanded increases, and as price increases, the quantity demanded decreases.
Changes in factors other than price can lead to shifts in the entire demand curve. For instance, changes in consumer preferences, income levels, or the prices of related goods can alter the quantity demanded at all price levels. These are called shifts in demand.
While the law of demand holds true for most goods, there are exceptions. Giffen goods are rare examples where an increase in price can lead to an increase in quantity demanded. This is typically seen in very specific circumstances where the good is considered a necessity and there are no close substitutes.
The law of demand is a universal economic principle applicable in markets around the world, regardless of cultural or regional differences.