Final answer:
The law of demand indicates that there is an inverse relationship between price and quantity demanded, where a higher price typically leads to a lower quantity demanded, and vice versa, assuming other factors remain constant.
Step-by-step explanation:
Law of Demand Explained
The law of demand is a fundamental principle in economics that describes the inverse relationship between the price of a good or service and the quantity demanded by consumers. This principle dictates that, generally, as the price of a good or service increases, the quantity demanded decreases, and conversely, as the price decreases, the quantity demanded increases. This occurs because consumers have a limited amount of money to spend, which they must allocate among various goods and services. As the price of a particular good or service rises, it becomes more expensive for consumers to purchase the same quantity as before, leading them to buy less of that good or service or switch to alternatives.
For example, if the price of a gallon of gasoline goes up, individuals may start looking for ways to reduce their consumption to save money, such as using public transportation, carpooling, or cutting down on non-essential trips. The law of demand assumes that other factors affecting demand, such as consumer income and preferences, remain constant while considering the effect of price changes on demand.