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Law of demand is regarded as one of the most basic concepts that is being studied in the field of Economics. It states that keeping all other factors constant (cetris peribus) the demanded quantity of a good is shown to exhibit an inverse relationship with the price of a good.

In simple words, with an increase in price, the demand decreases and with a decrease in price, the demand increases. The law of demand is used in conjunction with the law of supply to determine efficient resource allocation and optimum quantity and price of goods.

The consumer preference theory helps in understanding the combination of goods that a consumer might prefer taking into account budgetary constraints and price of goods in the market.

The best explanation for this is found in Microeconomics using the demand function, where demand functions are derived from the indifference curves.