Law of Demand states: When price falls, quantity demanded rises; when price rises, quantity demanded falls, assuming all other factors remain constant. Mathematical expression: Qd = a - bp (where Qd = quantity demanded, p = price, a and b are constants). Assumptions: Consumer rationality, constant income, no expectations of price change, no preference shifts. Mechanism: Substitution effect (cheaper item attracts buyers), Income effect (lower price increases real income, boosting demand). Graphically: Downward-sloping demand curve from left to right. Exceptions: Giffen goods (essential items where income effect dominates), Veblen goods (luxury goods where high price signals prestige). Real-world examples: Smartphones during price reductions see higher sales; essential medicines show weak law relationship. Strength: Universal principle; exceptions are rare and context-specific. ICAI questions: Application, understanding mechanisms, identifying exceptions. Exam tip: If question says demand increases with price, check if it mentions Giffen or Veblen goods; if not, it's wrong.