How does the demand curve illistrate the law of demand?

Answer 1

The law of demand states that consumers will buy more of a good when prices are lower and less of a good when prices are higher. In other words, the greater the quantity sold, the lower the price must be offered. The law of demand explains the effect price changes have on consumer behavior, and it applies in real life. Consumers buy significantly more products when there are large sales during the holiday season (e.g. Black Friday).

On a supply/demand graph, price is the y-axis and quantity is the x-axis. The demand curve stretches from the upper left of the graph (where prices are high and quantity is low) to the bottom right (where prices are low and quantity is high). This matches with the law of demand definition stated above.

There are assumptions that must be kept in mind for the law of demand to work. 1) Consumer tastes must stay the same. 2) Consumer income stays constant. 3) Prices of other goods remain the same. 4) The product is a normal good, meaning that demand of the product increases when consumer income increases. 5) Consumer expectations of the product are stable.