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

June 1, 2025 by rawan239

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

There are no changes in the taste and preferences of consumers.

Income of consumers remains constant.

Consumers are affected by demonstration effect.

There are no changes in the price of substitute goods.

This question was previously asked in

UPSC CDS-1 – 2019

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The Law of Demand is based on the assumption of *ceteris paribus*, meaning ‘all other things being equal’. This includes assumptions like: consumers’ tastes and preferences remain unchanged, income of consumers remains constant, prices of substitute and complementary goods do not change, and consumers’ expectations about future prices do not change. The ‘demonstration effect’ (or bandwagon effect, snob effect, Veblen effect) are phenomena where consumer demand is influenced by the consumption of others, which is generally considered a deviation from or exception to the standard law of demand, not an underlying assumption. In the basic formulation of the law of demand, consumer choices are independent and based on utility maximization given price and income.

The law of demand relies on several simplifying assumptions to establish the inverse relationship between price and quantity demanded. Factors that cause demand to deviate from this relationship are typically not included in the core assumptions.

Assumptions of the law of demand include: no change in income, no change in tastes/preferences, prices of related goods are constant, no expectation of future price changes, no change in the size of the population, and no change in the distribution of income.

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