Final answer:
The law of demand states that as the price increases, the quantity demanded decreases, which is reflected in option D. There is a clear distinction between a movement along the demand curve due to a price change and a demand curve shift due to other factors.
Step-by-step explanation:
The law of demand states that other things being equal, as the price increases, the quantity demanded decreases. This is because a higher price means a higher opportunity cost for the buyer, making the product less attractive compared to other goods. Therefore, the correct answer to the question is: D. Increases, quantity demanded decreases.
It's important to differentiate between a movement along the demand curve and a shift of the demand curve itself. A movement along the curve occurs when there is a change in quantity demanded due to a price change, while a shift in the demand curve indicates a change in demand at every price level due to other factors, such as consumer preferences or income levels.
Increase in demand:
An increase in demand means that the quantity demanded is higher at every given price, resulting in a rightward shift of the demand curve (from D0 to D1).
Decrease in demand:
A decrease in demand signifies that the quantity demanded is lower at every given price, prompting a leftward shift of the demand curve (from D0 to D2).