Law of demand

The principle that, other things equal, quantity demanded decreases as a good’s price rises. It describes an inverse relationship between price and quantity demanded.

Substitution effect: The change in a good’s use when its relative price changes, holding utility or purchasing power constant. A price rise makes alternatives relatively cheaper, shifting purchases away from the good.
Quantity demanded: The amount of a good consumers are willing and able to buy at a particular price during a specified period. The law describes how this amount changes as the good’s own price changes.
Price elasticity of demand: A measure of how strongly quantity demanded responds proportionally to a change in price. The law predicts the usual direction of response; elasticity measures its magnitude.
Alfred Marshall: A British economist whose textbook Principles of Economics systematized neoclassical supply-and-demand analysis. His work helped make the downward-sloping demand curve a standard analytical tool.
Income effect: The change in consumption caused by a price change altering a consumer’s real purchasing power. A higher price reduces what a consumer can afford, often lowering demand for the good.
Demand: The relationship between prices and the quantities of a good consumers are willing and able to buy. The law is a property of this broader price–quantity relationship.
Consumer surplus: The difference between what consumers are willing to pay and what they actually pay. The demand curve implied by the law helps measure gains buyers receive at market prices.
William Stanley Jevons: A British economist who helped develop marginal utility theory in the nineteenth century. His account of utility contributed to later explanations of consumer demand.
Diminishing marginal utility: The principle that each additional unit of a good often provides less added satisfaction than the previous one. Lower marginal value for extra units helps explain why buyers require lower prices to buy more.
Ceteris paribus: A Latin phrase meaning “other things equal,” used to isolate the effect of one factor while holding others constant. The law applies only when other influences on purchases are held fixed.

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Marginal UtilityRelated: Diminishing marginal utility helps explain why consumers buy fewer units when prices increase.