According to the law of demand, what occurs when price increases?

According to the law of demand, what occurs when price increases?

• A. Quantity demanded decreases
• B. Quantity demanded increases
• C. Supply increases
• D. Supply decreases

Answer: (A)

According to the law of demand, when the price of a good or service increases, the quantity demanded typically decreases. This is rooted in the basic principle that consumers tend to purchase less of a good when it becomes more expensive, as higher prices may lead to a substitution effect (consumers seeking alternatives) and an income effect (consumers feeling poorer and thus reducing their overall consumption). Therefore, as prices rise, people tend to buy fewer units of that good, leading to a decrease in quantity demanded. This relationship highlights the inverse correlation between price and quantity demanded, which is a fundamental concept in economics.

According to the law of demand, when the price of a good or service increases, the quantity demanded typically decreases. This is rooted in the basic principle that consumers tend to purchase less of a good when it becomes more expensive, as higher prices may lead to a substitution effect (consumers seeking alternatives) and an income effect (consumers feeling poorer and thus reducing their overall consumption). Therefore, as prices rise, people tend to buy fewer units of that good, leading to a decrease in quantity demanded. This relationship highlights the inverse correlation between price and quantity demanded, which is a fundamental concept in economics.