why is the law of demand important 
together with the law of supply the law of demand helps us understand why things are priced at the level that they are and to identify opportunities to buy what are perceived to be underpriced or sell overpriced products assets or securities for instance a firm may boost production in response to rising prices that have been spurred by a surge in demand can the law of demand be broken yes in certain cases an increase in demand doesn t affect prices in ways predicted by the law of demand for instance so called veblen goods are things for which demand increases as their price rises as they are perceived as status symbols similarly demand for giffen goods which in contrast to veblen goods aren t luxury items rises when the price goes up and falls when the price falls examples of giffen goods can include bread rice and wheat these tend to be common necessities and essential items with few good substitutes at the same price levels the bottom linethe law of demand posits that the price of an item and the quantity demanded have an inverse relationship essentially it tells us that people will buy more of something when its price falls and vice versa when graphed the law of demand appears as a line sloping downward this law is a fundamental principle of economics it helps to set prices understand why things are priced as they are and identify items that may be overpriced or underpriced 