Q5Managerial Economics & Financial Accounting
Question
2 marks
Explain the law of demand.
Answer
The law of demand states an inverse relationship between the price of a good and its quantity demanded, ceteris paribus.
The Law of Demand states that, ceteris paribus (all other factors like income and tastes remaining constant), there is an inverse relationship between the price of a commodity and the quantity demanded.
If the price rises, the quantity demanded falls, and if the price falls, the quantity demanded rises.