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Economic Theory

Figure 5.1 – Demand Schedule and Demand Curve

The demand schedule shown by table and the demand curve shown by
the graph in Figure 5.1 are two ways of describing the same relationship
between price and quantity demanded.

Demand curves will appear somewhat different for each product. They
may appear relatively steep or flat, or they may be straight or curved.
Nearly all demand curves share the fundamental similarity that they slope

down from left to right. So demand curves embody the law of demand: As
the price increases, the quantity demanded decreases, and conversely, as
the price decreases, the quantity demanded increases.

A rise in price of a good or service almost always decreases the
quantity demanded of that good or service. Conversely, a fall in price will
increase the quantity demanded. Economists call this inverse relationship

between price and quantity demanded the law of demand. The law of
demand assumes that all other variables that affect demand are held
constant.
There are a few exceptions to the law of demand. It means those

conditions when the law does not hold good. These are:
1. There are certain goods called as Giffen goods. In case of such
goods, the law of demand does not hold good. Sir Francis Giffen observed

that when Irish potato prices increased in bad years, people curtailed
spending on other commodities and increased their spending on potatoes.
Because with high potato prices and no increase in their money incomes,
they were now too poor to afford meat and other foodstuffs. So they had to

sustain themselves by eating more potatoes. That is people demanded

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