Final answer:
The law of demand indicates an inverse relationship between price and quantity demanded; as price rises, demand falls and vice versa, assuming all other factors are constant. Answer A correctly states the law of demand.
Step-by-step explanation:
The law of demand states that if all other factors remain equal, the higher the price of a good, the less people will demand that good. This is often represented in a demand curve, where the quantity demanded decreases as the price increases, showcasing an inverse relationship. When a product's price goes up, the opportunity cost of purchasing that product also increases, leading people to avoid buying it in favor of something else that they value more, this is an essence of the law of demand.
For instance, when the price of a gallon of gasoline rises, consumers often seek ways to decrease their use of gasoline by perhaps carpooling, using public transit, or planning activities closer to home to avoid long-distance travel. It's important to understand that this law operates under the assumption that all other factors affecting demand remain constant.
Therefore, the correct answer to the question, 'The law of demand states that:' is A. quantity demanded increases as the price of a product or service falls.