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Q111 (CDS-I/2019) Economy › Basic Concepts & National Income › Demand theory basics Answer Verified

Which one of the following is not an assumption in the law of demand?

Result
Your answer: —  Â·  Correct: C
Explanation

The Law of Demand describes the inverse relationship between price and quantity demanded, holding all other factors constant under the 'ceteris paribus' assumption. Key assumptions include that the consumer's income remains constant [1], tastes and preferences do not change [1], and the prices of related goods (substitutes and complements) remain unchanged [1]. The 'demonstration effect' refers to the tendency of consumers to imitate the consumption patterns of others, which actually causes demand to change regardless of price fluctuations. Therefore, the demonstration effect is a factor that influences demand rather than an assumption of the law itself. In fact, for the Law of Demand to hold strictly, it is assumed that such external social influences or 'distinctions' do not interfere with the price-quantity relationship. Thus, option 3 is not an assumption of the law.

Sources

  1. [1] Microeconomics (NCERT class XII 2025 ed.) > Chapter 2: Theory of Consumer Behaviour > 2.4.5 Shifts in the Demand Curve > p. 25
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