Demand falls as price rises as consumers will buy more of a good when its price is lower and less when its price is higher. This describes which concept?

Demand falls as price rises as consumers will buy more of a good when its price is lower and less when its price is higher. This describes which concept?

• A. Law of Demand
• B. Law of Supply
• C. Inelastic Demand
• D. Normal Goods

Answer: (A)

The main concept here is the Law of Demand: as price falls, quantity demanded rises, and as price rises, quantity demanded falls, all else being equal. This inverse relationship happens because lower prices make a good more affordable, increasing purchasing power (the income effect) and because it makes the good relatively cheaper than substitutes (the substitution effect). Together, these effects pull consumers to buy more when prices drop and less when prices rise, creating a downward-sloping demand pattern. The other options don’t describe this general reaction to price changes. The Law of Supply relates price to the quantity producers are willing to offer, and it moves in the opposite direction. Inelastic demand means quantity demanded changes little when price changes, which is not what’s described here. Normal goods concern how demand responds to changes in income, not price.

The main concept here is the Law of Demand: as price falls, quantity demanded rises, and as price rises, quantity demanded falls, all else being equal. This inverse relationship happens because lower prices make a good more affordable, increasing purchasing power (the income effect) and because it makes the good relatively cheaper than substitutes (the substitution effect). Together, these effects pull consumers to buy more when prices drop and less when prices rise, creating a downward-sloping demand pattern.

The other options don’t describe this general reaction to price changes. The Law of Supply relates price to the quantity producers are willing to offer, and it moves in the opposite direction. Inelastic demand means quantity demanded changes little when price changes, which is not what’s described here. Normal goods concern how demand responds to changes in income, not price.