Assumptions On Law of Demand

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Assumptions on which the law of demand is based

The law of demand is based on the basic assumption that ‘other things remain equal’ or unchanged. This means that

  • Prices of related goods (substitutes and complementary goods ) remain same or unchanged,
  • Consumers’ income or budget remains unaltered,
  • There is no change in tastes, preferences or choices of the consumers,
  • The good in question is a normal good and not an inferior good,
  •  All units of the good under consideration are homogeneous, inentical or exactly alike, and
  • All external environmental factors remain same in the sense that weather, climatic conditions, threat of war, political and other external conditions remain the same.

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