question_answer

                               Explain the Law of Demand with the help of diagram. State any two of its exceptions. Do you think that law of demand is effective in explaining the demand for gold in our country? Give reason in support of your answer,                                

Answer:

The Law of Demand states that other things remaining constant, the quantity demanded of a commodity. expands with fall in its price and contracts with a rise in its price. So, there is an inverse relationship between price and quantity demanded of a commodity. This is explained with the help of an imaginary, schedule and curve which is based on that imaginary schedule.                                     Demand schedule    

Price per Unit (Rs)	QuantityDemand (unit)
10	50
8	60
6	70
4	80
2	90

  Quantity demanded (units) Downward sloping demand curve Exceptions to the Law The law will not hold good under following circumstances: (i) Conspicuous Consumption The Law of Demand will not apply in case of costly items such as diamonds. These commodities will be demanded, even if the prices have gone very high. (ii) Ignorance If the consumer is not aware of the competitive price of the commodity, he may purchase more of the commodity even at higher price. Such ignorance of the buyers makes the Law of Demand ineffective, No, I don't think that law of demand explains the demand for gold in our country. In spite of continuous rising prices, demand for gold remains constant. It is because consumers believe that prices of gold will rise further in future and because of this their demand has not fallen in the present. In this case too, law of demand have failed due to high future expectation of price by the consumer.