Question

According to the law of demandLOADING...​, there is an inverse relationship between price and quantity demanded. That​ is, the demand curve for goods and services slopes downward.​ Why? A. When price​ increases, demand decreases. B. When the price of a good​ increases, consumers' purchasing power​ decreases, and they cannot buy as much of the good as they did prior to the price change. C. When the price of a good​ increases, consumers purchase complementary goods that are now relatively less expensive. D. When the price of a good​ increases, consumers' purchasing power​ increases, and they can buy more of the good than they did prior to the price change.

Answer 1

Option (B) is correct.

Step-by-step explanation:

We know that there is an inverse relationship between the price of the good and the quantity demanded. If there is any change in the price of the good then as a result this will also change the purchasing power of the consumer and then the consumers reallocate their income.

If there is an increase in the price of the product then as a result this will reduce the purchasing power of the consumer.

For example;

Consumer income = $1,000

Purchases 20 units of good X and 30 units of good Y with his given money income.

Now, if there is an increase in the price of good X, then

Consumer purchases 15 units of good X and 30 units of good Y with the same level of money income.

This indicates that amount of goods purchased is reduced because of the increase in the price of one of the good.