Assumptions
Every law will have limitations or exceptions. While expressing the law of demand, the assumption is that other conditions of demand are unchanged. If they don't remain constant, the inverse relation may not hold well. In other words, it is assumed that the income and tastes of consumers and the prices of other commodities are constant. This law operates when the commodity’s price changes and all other prices and conditions do not change.
The main assumptions are:
- Habits, tastes and fashions remain constant.
- Money, income of the consumer does not change.
- Prices of other goods remain constant.
- The commodity in question has no substitute or is not in competition by other goods.
- The commodity is a normal good and has no prestige or status value.
- People do not expect changes in the price.
- Price is independent and demand is dependent.
Read more about this topic: Law Of Demand
Famous quotes containing the word assumptions:
“What a man believes may be ascertained, not from his creed, but from the assumptions on which he habitually acts.”
—George Bernard Shaw (1856–1950)
“All of the assumptions once made about a parent’s role have been undercut by the specialists. The psychiatric specialists, the psychological specialists, the educational specialists, all have mystified child development. They have fostered the idea that understanding children and promoting their intellectual well-being is too complex for mothers and requires the intervention of experts.”
—Elaine Heffner (20th century)
“Unlike Boswell, whose Journals record a long and unrewarded search for a self, Johnson possessed a formidable one. His life in London—he arrived twenty-five years earlier than Boswell—turned out to be a long defense of the values of Augustan humanism against the pressures of other possibilities. In contrast to Boswell, Johnson possesses an identity not because he has gone in search of one, but because of his allegiance to a set of assumptions that he regards as objectively true.”
—Jeffrey Hart (b. 1930)