Which of the following best describes the law of demand?

• A. As price increases, demand increases
• B. As price decreases, demand decreases
• C. As price increases, demand decreases
• D. As quantity increases, demand decreases

Answer: (C)

The law of demand states that, all else being equal, there is an inverse relationship between price and quantity demanded. This means that as the price of a good or service rises, the quantity demanded by consumers tends to decrease. Conversely, when prices fall, the quantity demanded typically increases. This behavior reflects consumers' sensitivity to price changes and their tendency to purchase less of a good when it becomes more expensive, as they may seek alternatives or reduce their overall consumption.

The correct answer emphasizes this principle by indicating that an increase in price leads to a decrease in demand. Understanding this fundamental concept is crucial for analyzing market behavior and determining how shifts in price can influence consumer purchasing decisions.