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Law of Demand

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What Is the Law of Demand?
The Law of Demand Explained Using Examples in the U.S. Economy

By Kimberly Amadeo, About.com Guide

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The law of demand states that, all other things being equal, there will be less demand for higher priced goods and services. This definition makes sense -- you only have so much money to spend, and if the price of something goes up, you can afford less of it.

However, the "all other things being equal" part is really important. It's so important, in fact, that economists have come up with a fancy Latin term to describe it -- ceteris paribus. The "all other things" that need to be equal under ceteris paribus are the determinants of demand. They are: price, prices of related goods or services, income, tastes or preferences, expectations. For aggregate demand, the number of...

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