Which statement best explains the law of demand?

Which statement best explains the law of demand?

a. The quantity demanded by consumers increases as prices rise and decreases as prices fall.

b. The quantity demanded by consumers decreases as prices rise and increases as prices fall.

Answer: b. The quantity demanded by consumers decreases as prices rise and increases as prices fall.

Law of demand is a strongly defining principle in every economy, and it explains how the quantity of a certain good or service demanded corresponds to the price at which it is sold. It explains that assuming all other variables remain the same if the price of a certain product within the demand spectrum rises, the quantity requested by consumers will likely fall. On the other hand, when the price is high the quantity demanded of a good or a service is low among the consumers.

This direct relationship between price and the quantity demanded is assumed based on the principle that consumers have limited funds; therefore, in case the price of a good or service is lowered, consumers will use the freed-up money to buy more of the said product while in case of increasing price consumers will buy less of the product. The distance between two points is the shortest and the law of demand is one of the important pillars of microeconomic theory and market research.