What does the law of demand state?

The law of demand is a fundamental principle in economics that describes the relationship between the price of a good and the quantity that consumers are willing to purchase. It states that, all else being equal, when the price of a good decreases, the quantity demanded for that good typically increases. Conversely, if the price rises, the quantity demanded tends to decrease.

This relationship can be attributed to the substitution effect, where consumers may opt for a less expensive alternative when prices increase, and the income effect, as a lower price effectively increases consumers' purchasing power, allowing them to buy more of the good.

Understanding this law is crucial, as it lays the groundwork for analyzing consumer behavior in response to price changes, which is essential for making informed business and economic decisions.

The other options do not accurately reflect the nature of consumer demand in relation to price changes and thus do not align with the law of demand.