Demand and the Law of Demand

Last updated at October 5, 2026 by

Where do we start?
  • In the flight example, we saw that a price depends on two things: demand and supply .
  • Let's start with demand , the buyer's side of the market.
  • We will follow one buyer, Srivalli , who buys mangoes from her local market.
  • Let's see how much she buys when the price of mangoes changes.
Example 1: How much does Srivalli buy at different prices?
  • At the beginning of the mango season, the price of mangoes is high.
  • Later, in the peak season, the price falls.
  • The quantity Srivalli buys at different prices is:
Price of mango per kg Quantity demanded by Srivalli
Rs 150 1 kg
Rs 100 2 kg
Rs 50 3 kg
  • As the price falls, Srivalli buys more mangoes.
Example 2: What if Srivalli wants an iPhone?
  • Wanting something is not enough to buy it.
  • Srivalli wants to buy an iPhone, but she cannot afford it. She does not have the money.
  • If the price of the iPhone rises or falls, the quantity she buys stays 0.
Example 3: What about a rich customer?
  • Now take the opposite case.
  • Mr M is very rich. He can afford an iPhone, but he prefers an Android phone.
  • If the price of the iPhone rises or falls, the quantity he buys stays 0.
So what is demand?
  • The quantity of a product that people are willing and able to buy at a particular price, depending on their needs, preferences, season, trend, and income, is called the demand for the product.
What do "willing to pay" and "able to pay" mean?
  • Willing to pay - you want the product and are ready to spend money on it.
  • Able to pay - you actually have enough money to buy it. This is called purchasing power : how much one unit of a currency can buy at a particular time.
  • Demand exists only when both are there.
    • Srivalli and mangoes: willing and able. So there is demand.
    • Srivalli and the iPhone: willing but not able. So there is no demand.
    • Mr M and the iPhone: able but not willing. So there is no demand.
Case Willing? Able? Demand?
Srivalli and mangoes Yes Yes Yes
Srivalli and the iPhone Yes No No
Mr M and the iPhone No Yes No
Demand needs both willing and able
Demand Exists only when both are true
Willing to pay
Wants the product
Able to pay
Has the purchasing power
What is the Law of Demand?
  • When price falls, quantity demanded rises. When price rises, quantity demanded falls.
  • This means price and quantity demanded have an inverse relationship - they move in opposite directions.
  • This inverse relationship between the price of a product and its quantity demanded is called the Law of Demand .
The Law of Demand
Price rises
↑
Quantity demanded falls
↓
Price falls
↓
Quantity demanded rises
↑
↓
Price and quantity demanded move in opposite directions
What are a demand schedule and a demand curve?
  • Demand schedule - a table showing the quantity demanded at different prices.
Price of mango per kg Quantity demanded by Srivalli Point
Rs 150 1 kg A
Rs 100 2 kg B
Rs 50 3 kg C
  • Demand curve - the demand schedule drawn as a graph.
  • How to draw it:
    1. Draw two axes. Price goes on the y-axis, quantity on the x-axis.
    2. Plot point A at (Rs 150, 1 kg).
    3. Plot point B at (Rs 100, 2 kg).
    4. Plot point C at (Rs 50, 3 kg).
    5. Join the points. The line is the demand curve DD'.
  • DD' slopes downward. This shows the inverse relationship between price and quantity.
Demand and the Law of Demand - The Price Puzzle: What - [Teachoo] - Concepts
Drawing Srivalli's demand curve step by step
What is individual demand?
  • The quantity of a good or service that an individual consumer wants to buy at different prices, keeping other factors constant , is called individual demand .
  • "Other factors constant" means things like income and taste do not change. Only the price changes.
  • Srivalli's mango table shows her individual demand.
What is market demand?
  • The total quantity demanded by all potential buyers at different prices, that is, the sum of all individual demand , is called market demand .
Price Q1 (Srivalli) Q2 (Alex) Q3 (Israt) Market demand (QD)
Rs 150 1 kg 2 kg 3 kg 6 kg
Rs 100 2 kg 4 kg 6 kg 12 kg
Rs 50 3 kg 6 kg 9 kg 18 kg
  • QD = Q1 + Q2 + Q3.
  • Plotting market demand at each price gives the market demand curve DmDm'.
part 2 - Demand and the Law of Demand - Concepts - Chapter 9 - The Price Puzzle: What Drives the Market - Understanding Society India and Beyond Class 9
Srivalli's demand curve and the market demand curve, on the same price scale (Fig 9.3)
What is the difference between individual demand and market demand?
Individual demand
Market demand
One buyer's demand
All buyers' demand added together
At Rs 100: Srivalli buys 2 kg
At Rs 100: Srivalli + Alex + Israt = 12 kg
Curve DD' (steeper in this example)
Curve DmDm' (flatter in this example)
📜 DON'T MISS OUT

Question: Did you notice that the market demand curve is flatter than Srivalli's individual demand curve? Why is that?

  • Market demand adds up many buyers.
  • When the price falls from Rs 150 to Rs 50: Srivalli's demand rises by 2 kg, but market demand rises by 12 kg.
  • The same price change causes a much bigger change in quantity.
  • So the market curve is flatter and more responsive.
📖 Questions from the Book

8. In the table below, different prices of guava are given. a. Think and write how much guava you will buy at each price. b. Ask the same question to three of your friends and fill in the table. c. Also make a graph for each one of you and one final graph for the total quantity.

Sample answer (your numbers will differ):

Price You Friend 1 Friend 2 Friend 3 Total
Rs 100/kg 1 kg 0 kg 0 kg 0 kg 1 kg
Rs 80/kg 2 kg 1 kg 1 kg 1 kg 5 kg
Rs 50/kg 3 kg 2 kg 2 kg 3 kg 10 kg
Rs 20/kg 5 kg 4 kg 3 kg 4 kg 16 kg
part 3 - Demand and the Law of Demand - Concepts - Chapter 9 - The Price Puzzle: What Drives the Market - Understanding Society India and Beyond Class 9
Four individual demand curves, then the total demand curve
  • Price is on the y-axis and quantity on the x-axis.
  • Each person's graph slopes downward.
  • The total graph is the market demand curve. It is flatter, because the total rises by 15 kg as the price falls from Rs 100 to Rs 20.
Test yourself
1. What is demand?
Show answer Hide answer

The quantity of a product that people are willing and able to buy at a particular price.

2. Mr M can afford an iPhone but prefers Android. Does he have demand for the iPhone?
Show answer Hide answer

No. He is able but not willing to pay.

3. Fill in the blank: The Law of Demand shows an ______ relationship between price and quantity demanded.
Show answer Hide answer

Inverse.

4. What is the difference between individual demand and market demand?
Show answer Hide answer

Individual demand is one buyer's demand. Market demand is the sum of all buyers' demand.

5. At Rs 100, Srivalli buys 2 kg, Alex 4 kg and Israt 6 kg. What is the market demand?
Show answer Hide answer

12 kg.

📝 What Have We Learned
  • Demand needs both willingness and ability to pay.
  • By the Law of Demand, price and quantity demanded move in opposite directions, so the demand curve slopes downward.
  • Market demand is the sum of all individual demand, and in this example its curve is flatter.
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CA Maninder Singh is a Chartered Accountant qualified since 2010 and an educator teaching since 2006. At Teachoo, he draws on his accounting and tax experience to explain Accounts, Income Tax and GST through step-by-step lessons and practical examples.

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