Question

A fundamental characteristic of the demand side of markets for goods and services is given by the law of demand, which states that:

1) as the price of a good increases, demand will decrease
2) as the price of a good decreases, demand will increase
3) as the price of a good increases, quantity demanded will decrease
4) as the price of a good decreases, quantity demanded will increase
5) as the price of a good increases, quantity demanded will decrease, holding all other factors constant
6) as the price of a good decreases, quantity demanded will increase, holding all other factors constant
7) as the price of a good increases, demand will decrease, holding all other factors constant
8) as the price of a good decreases, demand will increase, holding all other factors constant

Answer 1

The law of demand illustrates that a higher price for a good leads to a lower quantity demanded, and a lower price leads to a higher quantity demanded, assuming all other factors are held constant.

Step-by-step explanation:

The law of demand states that there is an inverse relationship between the price of a good or service and the quantity demanded. This principle is fundamental to understanding how markets operate. To summarize, the key aspects of the law of demand are as follows:

1. As the price of a good increases, the quantity demanded will decrease, holding all other factors constant.
2. As the price of a good decreases, the quantity demanded will increase, holding all other factors constant.

This means that if the price of a gallon of gasoline rises, people will generally buy less gasoline, perhaps by carpooling or using other forms of transportation—provided that other factors influencing demand do not change.