Law of Demand
The quantity demanded of a commodity increases as the price decreases. In other words, the quantity demanded of a commodity decreases as the price of the commodity increases. Therefore, from the definition of demand, it follows that the prices and quantities demanded
of a commodity are inversely related.
Mathematically, it is expressed as:
Qd = f(1p).
Where: Qd = Quantity demanded of the commodity, p = unit price of the commodity (Qd) is an inverse function of price.
The above expression indicates that quantity demanded of a commodity (Qd) is an inverse function of the price of the commodity (p).
The law of demand is violated if:
(a) The commodity is a Giffen (inferior) good: Basic foodstuffs like garri, yam, and rice fall into this category. Most people do no vary their purchases as the prices of basic food stuffs increase (decrease) because the expenditure on them forms a small percentage of one’s total outlay on food.
(b) There is fear of a future increase in price: The fear that the present increase in price is just the beginning of such increases in the future may not prevent people from buying more of it now 10 AEM 251 INTRODUCTION TO AGRICULTURAL ECONOMICS even though its price is increasing. For example, increasing prices of ram during Salah celebration may be seen as a sign that ram would become scarce as the festival draws nearer, so people may rush to buy more with the increasing prices
(c) The article is that of ostentation: Articles of ostentation, such as jewelries, expensive cars and clothes fall into this category. Rich women rush at expensive jewelries and clothes in place of the cheap ones while rich guys are crazy for state of the art expensive cars, with the assumption that the more expensive these goods are the more superior quality-wise.