The law of demand is a fundamental principle in microeconomics that states that there is an inverse relationship between the price of a good or service and the quantity demanded. In other words, as the price of a product goes up, the quantity demanded will go down, and vice versa. This occurs because of diminishing marginal utility, which means that consumers use the first units of an economic good they purchase to serve their most urgent needs first, then they use each additional unit of the good to serve successively lower-valued ends.

It is important to note that the law of demand assumes that all other factors affecting demand remain constant, such as the prices of other goods, the consumers income, and preferences. In the real world, there are many determinants of demand other than price. There are also exceptions to the law of demand, such as Giffen goods and perfectly inelastic goods.

The law of demand is relied heavily upon by managerial economics, which is a branch of economics that applies microeconomic analysis to managerial decision-making, to make informed decisions on pricing, production, and marketing strategies. In this context, understanding the alternative factors that influence the law of demand becomes crucial for managers and decision-makers.