The Law of Demand states that, all else equal, as price falls, quantity demanded ___.

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Multiple Choice

The Law of Demand states that, all else equal, as price falls, quantity demanded ___.

Demand shows an inverse relationship between price and the quantity demanded, all else equal. When the price falls, buyers can afford more with the same income, so the quantity they want to purchase increases. This happens partly because the purchasing power of money rises (income effect) and partly because the good becomes cheaper relative to substitutes, encouraging people to switch to it (substitution effect). Because of these effects, a lower price leads to a higher quantity demanded. So the statement that fits is that quantity demanded rises when price falls.

Demand shows an inverse relationship between price and the quantity demanded, all else equal. When the price falls, buyers can afford more with the same income, so the quantity they want to purchase increases. This happens partly because the purchasing power of money rises (income effect) and partly because the good becomes cheaper relative to substitutes, encouraging people to switch to it (substitution effect). Because of these effects, a lower price leads to a higher quantity demanded. So the statement that fits is that quantity demanded rises when price falls.

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