Question

Define the law of demand. Define the law of supply. Describe these terms and make sure to include an explanation of the relationship between price and quantity.

Answer 1

The law of demand states that quantity purchased varies inversely with price. Thus the law states that higher the price lower will be the demand and lower the price higher will be the demand. The law of demand helps us to determine the demand curve and the demand curve expresses the sum of quantity demanded at each price. So in case of law of demand there is an inverse relationship between price and quantity.

The law of supply states that an increase in price of goods will lead to an increase in quantity supplied and a decrease in price of goods will lead to decline in quantity supplied. In other words as per law of supply the quantity supplied varies directly with price and not in an inverse manner as in the case of law of demand.