Unit 2.1 · Demand
Assumptions Underlying the Law of Demand
AO2HL
Syllabus Requirement
Rational consumer behavior, utility maximization, ceteris paribus.
Assessment Objectives
AO2Application and Analysis
HLThis topic is assessed at Higher Level only.
Summary
The assumptions underlying the law of demand explain why there is an inverse relationship between price and quantity demanded. When prices decrease, consumers can afford to buy more, leading to an increase in demand for that product while reducing demand for alternatives.