Law of Demand
Definition
The law of demand states that as the price of a good or service increases, the quantity demanded decreases, and vice versa.
Analogy
Think of the law of demand like a seesaw. As the price goes up, the quantity demanded goes down, just like when one side of a seesaw goes up, the other side goes down.
Related terms
Substitution Effect: When consumers switch to a different product due to a change in relative prices.
Income Effect: The change in quantity demanded due to a change in purchasing power caused by a change in price.
Elasticity of Demand: Measures how responsive quantity demanded is to changes in price.
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