A Demand Analysis — Economics STD 12 Commerce / Arts — Question

Assumptions to the Law of Demand:

• Prices of Substitute goods remain constant : The price of substitute goods should remain unchanged, as change in the price will affect the demand for the commodity.
• Prices of Complementary goods remains constant : A change in the price of one good will affect the demand for other, thus the prices of complementary goods should remain unchanged.
• No Expectation about future changes in prices : The consumers do not expect any significance rise or fall in the future prices.
• No change in size of Population : The size of population, gender ratio and age composition are assumed to remain constant. As such changes are sure to affect demand.
• No change in Taxation Policy : The level of direct and indirect tax imposed by the government on the income and goods should remain constant.
• Constant Level of Income : Consumer’s income must remain unchanged because if income increases, consumer may buy more even at a higher price not following the law of demand.
• No Change in Tastes, Habits,
  Preference, Fashions, etc. : If the taste changes then the consumers preference will also change which will affect the demand. When commodities are out of fashion, then demand will be low even at a lower price.