Assumptions of Law of Demand

Law of demand is the concept used in the economics according to which other things remaining the same demand for a product will increase when the price of the product is decreased and when the price of the product is increased the demand for a product will decrease. Law of demand is based on certain assumptions let’s look at the assumptions of law of demand –

Law of Demand Assumptions

Income of the Consumer

The first and foremost assumption of law of demand is that income of the consumer remains constant hence if the income of the consumer increases then even when the price of product rises it will have no effect on the demand for product as increased income can be used to purchase the higher priced products and if the income of the consumer decreases than even without price rise demand for product will decline.

Consumer Taste and Preference

Another assumption of a law of demand is that there is no change in the consumer taste and preference so if the consumer preference or taste changes and it is against the product than even when a price of product declines there will not be any increase in demand. So for example due to the advent of LCD and LED television consumer has changed their preference and they prefer to buy LCD or LED over normal television even when the price of normal television is less than the price of LCD.

Expectation about Future Price

There is no change in the expectation about the future price of the product so for example if the consumer is expecting the price of product to rise in future than he or she will demand more even when price has not declined or if the consumer is expecting the price of product to decline then his or her demand will be less even when price of product has not increased.

Price of Substitute Products

Another assumption is that there is no change in the price of substitute products so for example if the price of Coke is decreased then it will lead to fall in the demand for Pepsi even when the price of Pepsi has remain constant as Pepsi is close substitute of Coke, in the same way if the price of Coke is increased than it will lead to rise in demand for Pepsi.


One more assumption is that there is no change in the number of people or in simple words the population should remain the same because if population increases then demand for product is bound to increase as more people will mean more demand for products without any decrease in price.

As one can see from the above that law of demand is based on many assumptions but still it is one of the basic and important concept as far as economics is concerned.

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