State the law of demand and six basic assumptions as related to agricultural products. Illustrate your answer with the aid of a demand schedule and a demand curve
The law of demand states that as the price of a product increases, the quantity demanded of that product decreases, and as the price decreases, the quantity demanded increases, all other factors remaining constant.
Six basic assumptions related to agricultural products are:
- The price of the product is the only factor that influences the quantity demanded.
- Consumers have a limited budget for spending on agricultural products.
- The product is homogeneous, meaning that it is the same quality and has the same features across different sellers.
- Consumer preferences for agricultural products do not change.
- The product is a necessity, and there are no close substitutes for it.
- Consumers have complete information about the product.
A demand schedule and demand curve can illustrate the law of demand. A demand schedule is a table that shows the relationship between the price of a product and the quantity demanded of that product. A demand curve is a graphical representation of the same relationship.
For example, let's consider the demand for apples. Suppose the price of apples is $2 per pound, and consumers are willing to buy 100 pounds of apples per week. If the price of apples decreases to $1.50 per pound, consumers may be willing to buy 120 pounds of apples per week. This relationship can be shown in a demand schedule:
| Price of Apples |
Quantity Demanded |
| $2.00 |
100 |
| $1.50 |
120 |
The same relationship can be shown graphically in a demand curve:
[Graph showing a downward sloping demand curve]
As the price of apples decreases from $2.00 to $1.50 per pound, the quantity demanded of apples increases from 100 to 120 pounds per week. This illustrates the law of demand: as the price of a product decreases, the quantity demanded of that product increases, all other factors remaining constant.