The question function: Say no to plagiarism. Get a tailor-made essay on "Why Violent Video Games Shouldn't Be Banned"? Get an original essay The quantity of each good demanded by an individual family is influenced by five main variables: The price of the good The prices of other goods The income of the family Various 'sociological' factors, and The tastes and preferences of the family. The above list can be conveniently summarized in what is called a demand function. The demand function is a mathematical expression of the relationship between the quantity demanded of a commodity and its various determined variables listed above. The form of the function determines the sign and magnitude of this dependence. If we hold all other variables constant, the quantity demanded of a commodity will universally vary with its price. Since this relationship holds for almost all goods we purchase, this is known as the Law of Demand. The demand curve in Figure 3.1 illustrates the Law of Demand which states that the quantity demanded of a good increases when its price decreases. The opposite is also true: quantity demanded decreases when price increases. There is therefore a negative (inverse) relationship between price and quantity. They move in opposite directions. If one increases, the other decreases.1. Law of diminishing marginal utility: The purchase of a commodity must occur with a sacrifice. The sacrifice is calculated from the price paid. The consumer will never pay more for a good than the monetary value of its marginal utility. But the greater the quantity of a good purchased, the lower the marginal utility. Therefore, the consumer will not purchase a large quantity unless the price is low.2. Income effect: the fall in the price of a commodity is equivalent to an increase in the consumer's income because he now has to spend less to purchase the same quantity as before. A portion of the money thus earned can be used to purchase other units of the goods. Therefore, when the price falls, the quantity purchased increases. When the price increases, the consumer's income is, in effect, reduced and he must reduce spending on the commodity. Then the amount purchased decreases.3. Substitution effect: when the price of a good falls, it will be replaced with more expensive goods because the consumer will thus benefit. If the price of coffee drops, some people will use it to some extent in place of other drinks. Conversely, when the price of a commodity increases, other commodities will be used in its place, at least to some extent. Therefore, a decrease in the price of a commodity increases demand, and an increase in its price reduces demand. 4. Change in the number of buyers: When the price of a commodity falls, some people who were previously unable to purchase it may do so. “Lower prices attract new buyers” (Samuelson). Therefore, total demand will increase. Conversely, when the price of a commodity increases, some people will find it impossible to purchase it and will exit the market. Change in the number of uses: When the price of a commodity falls, it is used for various uses. For example, when the price of mango falls, it is used not only for increased consumption but also for making chutney. Likewise, when the price increases, the uses of the commodity are limited. Assumptions of the Law of Demand: The Law of Demand is based on the following assumptions:1. The habits and tastes of the applicants remain unchanged: the amount of goods a person consumes depends on his tastes and habits. If they change, the quantity consumed will also change. When a commodity becomes fashionable, its consumption will increase, regardless of price changes. The curve of.