Revision: Theory of Demand and Supply >> Elementary Theory of Demand Economics (English Medium) ICSE Class 10 CISCE

Complementary goods are those goods that are used jointly or consumed together, like cars and petrol or gas and gas stoves. In the case of complementary goods, an increase in the price of one good decreases the demand for the other goodits complementary good.

Substitute goods are ones that can be used in place of the others.

• Marshall: “Amount demanded increases with a fall in price and diminishes with a rise in price, other things being equal.”
• Samuelson: “People buy more at lower prices and less at higher prices, ceteris paribus.”
• Ferguson: “The quantity demanded varies inversely with price.”

When the quantity demanded of a commodity falls due to a rise in its own price of the commodity, other factors remaining constant, it is called a contraction of demand or a decrease in the quantity demanded.

When there is a fall in demand due to changes in factors other than the own price of the commodity, it is called a decrease in demand.

D_x = f(P_x, P_n, Y, T)

Where D_x = Demand for commodity x,
P_x = Price of the commodity x,
P_n = Price of related commodities,
Y = Income of the consumer,
T = Taste.

The law of demand states the inverse relationship between the price and quantity demanded of a commodity. According to this law, other things being equal, when the price of a commodity increases, its demand falls and when the price falls, demand increases. Note that the law of demand indicates only the 'direction' of change and not the ‘magnitude’ of change in demand. Further, there is no proportionate relationship between price and demand. If the price of a commodity rises by 20%, its demand may fall by any proportion (i.e. by more or less than 20%). Law of demand, thus, is a qualitative concept, as it does not indicate the magnitude of change in demand. It is important to note here that the law of demand states the effect of change in price on demand and not the effect of change in demand on price.

1. According to Marshall, “The amount demanded increases with a fall in price and diminishes with a rise in price.”
2. According to Bilas, “The law of demand states that other things being equal, the quantity demanded per unit of time will be greater, lower the price and smaller, higher the price.”

The law of demand states that, other things being equal, the quantity demanded of a good rises when its price drops and falls when its price increases. This shows an inverse relationship between a product’s price and the quantity consumers are willing to buy.

• The demand curve for an individual consumer slopes downward from left to right, demonstrating that lower prices lead to higher quantities demanded.​
• Demand is affected by individual preferences, income, and prices of related goods (substitutes and complements).​
• Only price changes cause movement along the demand curve; other factors cause the curve to shift.

• Demand is affected by many factors, not just price.
• A change in any determinant—like income, preferences, or population—can shift demand.
• Some factors (like climate or government taxes) have seasonal or policy-based effects.
• Related goods can be substitutes (used instead) or complements (used with).
• Real-life decisions—like bulk buying before a GST rise—are practical examples of demand determinants at work.

• There is an inverse relation between price and quantity demanded.
• All other factors must remain constant for the law to apply.
• The demand curve always slopes downwards.

• Not all goods follow the law of demand; some have exceptions.
• Giffen and Veblen goods are classic exceptions.
• Be aware of context (exam and real-world) when citing examples.

• Change in demand occurs due to factors other than price.
• Increase in demand: Demand curve shifts right (favourable factors).
• Decrease in demand: Demand curve shifts left (unfavourable factors).