Which principle describes consumers buying more of a good when its price falls and less when it rises?

Which principle describes consumers buying more of a good when its price falls and less when it rises?

• A. Law of Demand
• B. Law of Diminishing Returns
• C. Law of Opportunity Cost
• D. Law of Supply

Answer: (A)

Demand for goods moves opposite to price. When the price falls, people buy more; when the price rises, they buy less. This inverse relationship is what the Law of Demand describes, and it’s visible on the downward-sloping demand curve. The effect comes from the substitution effect—cheaper goods look more attractive than alternatives—and the income effect—lower prices effectively increase purchasing power, letting buyers afford more. Other choices don’t capture this consumer-side response: diminishing returns is about output from inputs in production, not how buyers respond to price changes; opportunity cost is about the trade-offs involved in choosing one option over another, not the direct price-quantity link; and the law of supply describes how producers respond to price, not how consumers react.

Demand for goods moves opposite to price. When the price falls, people buy more; when the price rises, they buy less. This inverse relationship is what the Law of Demand describes, and it’s visible on the downward-sloping demand curve. The effect comes from the substitution effect—cheaper goods look more attractive than alternatives—and the income effect—lower prices effectively increase purchasing power, letting buyers afford more.

Other choices don’t capture this consumer-side response: diminishing returns is about output from inputs in production, not how buyers respond to price changes; opportunity cost is about the trade-offs involved in choosing one option over another, not the direct price-quantity link; and the law of supply describes how producers respond to price, not how consumers react.