What is the law of demand?

The law of demand is a foundational concept of economics which indicates that demand for a particular good rises as the price for the product falls. Inversely, when the price for a good rises, demand falls.

The "demand curve," which reveals a downward slope under typical circumstances, depicts the law of demand. Companies rely on the law of demand to set the right price points on goods to optimize revenue. When the price is too high, the quantity demanded by consumers may drop sharply. When a price is too low, the company may miss out on revenue. The equilibrium price is the optimum price point, where supply and demand balance to optimize profit.