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When preparing for **UGC NET**, two of the most important microeconomics concepts you *must* master are the **Law of Demand** and the **Elasticity of Demand**. These topics are not only theoretical—they also form the base for analytical and case-based MCQs in the exam.

Let’s break them down in a way that’s simple, practical, and exam-focused.

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Part 1: Law of Demand

What is the Law of Demand?

The **Law of Demand** states:

> *“Ceteris paribus (all other factors being constant), as the price of a good increases, the quantity demanded decreases; and as the price decreases, quantity demanded increases.”*

This shows an **inverse relationship** between price and quantity demanded.

Demand Curve

- **Downward sloping**

- Moves **left to right**

- Due to substitution effect & income effect

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Assumptions of the Law of Demand

1. No change in income

2. No change in taste/preferences

3. Prices of related goods remain constant

4. No expectation of future price changes

5. No change in population

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Exceptions to the Law of Demand (Very Important for UGC NET)

| Exception | Explanation |

|----------|-------------|

| **Giffen Goods** | Inferior goods where price rise leads to more consumption (e.g., cheap staple foods in poor regions) |

| **Veblen Goods** | Luxury goods; higher price = higher demand due to status (e.g., designer watches, luxury cars) |

| **Necessities** | Goods like salt or insulin may not follow this law strictly |

| **Future Expectations** | If people expect prices to rise, current demand may go up despite price increase |

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Part 2: Elasticity of Demand

Elasticity measures how sensitive quantity demanded is to a change in another factor, most commonly **price**.

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1. Price Elasticity of Demand (PED)

> **Formula:**  

> **PED** = (% change in Quantity Demanded) / (% change in Price)

Types of PED:

| Type | Description | Elasticity Value |

|------|-------------|------------------|

| Perfectly Elastic | Demand changes infinitely with price | ∞ |

| Elastic | % change in Qd > % change in Price | >1 |

| Unitary Elastic | % change in Qd = % change in Price | =1 |

| Inelastic | % change in Qd < % change in Price | <1 |

| Perfectly Inelastic | No change in Qd despite price change | 0 |

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2. Income Elasticity of Demand

> **YED** = (% change in Qd) / (% change in Income)

- **Positive YED** → Normal goods  

- **Negative YED** → Inferior goods

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3. Cross Elasticity of Demand

> Measures responsiveness of demand for Good A to a change in the price of Good B.

> **XED** = (% change in Qd of A) / (% change in Price of B)

- Positive XED → **Substitute goods**  

- Negative XED → **Complementary goods**

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Final Tips for UGC NET

- Draw and practice **diagrams** of demand curves and elasticity types.

- Understand both **mathematical and conceptual** aspects.

- Focus on **exceptions**—they’re favorites in objective-type questions.

- Try previous year questions on this topic for pattern familiarity.

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 Absolutely! Here's a UGC NET–friendly **blog post** on **Law of Demand & Elasticity of Demand**, ideal for Paper 2 (Economics or Commerce):