Question

The law of demand is an inverse relationship between the price and quantity demanded. Evaluate how you can relate this law to a recent purchase that you have made. Why do you think this law is an effective law that holds within markets? How do you think a store is able to deal with a shortage that is present at a grocery store? What does a shortage reflect about the product?

Answer 1

in almost all the major decisions regarding purchases law of demand played a major role and for instance one such scenario in the recent time is that, 2 months prior to what is today the price of onions just RS.20and as a result of this I allocated a budget of hundred rupees with which I bought 5 kgs of onions but the prices increased like anything and at a point of time the onion prices touched hundred rupees and as a result of this I used to buy only 1 kg of onions and this tells us that when the price increases the quantity demanded decreases and this is an effective law in the market because customers are always posed with a particular budget and based on the budget they have to allocate things on the whole and if the price rises the amount you will get would be less than that of before on the whole.

There is a shortage in the market the demand would be more than supply consider oranges in a fruit market where the price is very low so that the quantity demanded is high and the supply is low and the stories dealing with purchase of shortage by catering only to those who come first and shortage actually reflect the fact that the price is set below the equilibrium price and this can be e dealt by increasing the price