The law of demand is an economic principle that states that the demand for a good or service decreases as the price increases, and as the price decreases, the demand increases. This means that if the price of a product goes up, people will buy less of it, and if the price goes down, people will buy more of it.
So, which of the following is consistent with the law of demand? The answer is simple – as the price of a good or service increases, the quantity demanded will decrease, while as the price decreases, the quantity demanded will increase. This is the fundamental principle behind the law of demand.
But why does this happen? The main reason behind this economic principle is the concept of scarcity. When a product is scarce, its price tends to increase, and when a product is abundant, its price tends to decrease. As the price increases, consumers tend to look for substitutes, which leads to a decrease in the quantity demanded.
On the other hand, when the price of a product decreases, people tend to buy more of it. For example, if the price of oranges goes down, people will buy more oranges because they are cheaper. This leads to an increase in the quantity demanded.
It is important to note that the law of demand is not always applicable to every product. There are some products that people will always buy, regardless of the price. These are known as necessity goods, like food, water, and shelter. However, for most other products, the law of demand holds true.
In conclusion, the law of demand is a fundamental economic principle that helps to explain consumer behavior. As the price of a product increases, the quantity demanded decreases, while as the price decreases, the quantity demanded increases. This is consistent with the concept of scarcity and the idea that people tend to look for substitutes when a product becomes more expensive. By understanding the law of demand, businesses can better understand their customers and adjust their pricing strategies accordingly.
