In the standard law of demand, which of the following is not an assumption underlying the inverse relationship between price and quantity demanded?

Introduction / Context:
The law of demand states that, other things being equal, the quantity demanded of a good falls when its price rises and rises when its price falls. For this inverse relationship to hold, certain assumptions must remain unchanged. Exam questions often test whether you can distinguish these standard assumptions from other real world influences that are deliberately excluded. This question focuses on identifying which listed condition is not part of the usual ceteris paribus assumptions for the law of demand.

Given Data / Assumptions:

• We are discussing the individual or market demand for a good.
• The law of demand requires “other things” to remain constant.
• Key factors include income, tastes, and prices of related goods.
• We must pick the statement that does not fit these standard assumptions.

Concept / Approach:
The law of demand is derived under ceteris paribus conditions which include constant income, constant tastes and preferences, and constant prices of related goods such as substitutes and complements. If any of these factors change, the entire demand curve shifts, and we can no longer attribute changes in quantity demanded solely to changes in the price of the good itself. The “demonstration effect” refers to consumers changing their consumption patterns because they observe the consumption of others, which is not a standard assumption in the basic formulation of the law of demand.

Step-by-Step Solution:
Step 1: Recall the main ceteris paribus assumptions: income, tastes, and prices of related goods remain unchanged. Step 2: Examine each option to see whether it matches one of these standard assumptions. Step 3: Recognize that constant income and constant tastes are classic assumptions, as is no change in the prices of substitute goods. Step 4: Identify “consumers are affected by demonstration effect” as a behavioural influence that is not part of the basic ceteris paribus conditions.

Verification / Alternative check:
A quick check is to recall how demand curves are drawn in introductory textbooks. The demand curve shows quantity demanded at various prices, holding income, tastes, and prices of related goods constant. There is no mention of demonstration effect in that basic framework. Demonstration effect would actually introduce changes in tastes over time, leading to shifts in the demand curve, which violates the assumption of no change in preferences.

Why Other Options Are Wrong:
No changes in taste and preferences: This is a standard assumption to ensure that the demand curve does not shift while we study price changes.
Income of consumers remains constant: This is also a classic assumption because changes in income shift the demand curve and would confuse the pure price effect.
No changes in the price of substitute goods: This is necessary because changes in substitute prices alter demand for the good, again shifting the curve rather than moving along it.

Common Pitfalls:
Students sometimes think that any realistic factor affecting demand must be an assumption of the law of demand. In fact, many real world influences, including advertising, social norms, and demonstration effects, are deliberately held constant or excluded to keep the theory simple. The law of demand is about the relationship between price and quantity demanded under controlled conditions, not about every possible behavioural influence.

Final Answer:
The condition that is not an assumption of the standard law of demand is that consumers are affected by demonstration effect.