Question:
The Law of Demand states that
(1) a decrease in the price of a good, shifts the demand curve of the good leftward.
(2) when other things remain the same, the higher the price of a good, the lower is the quantity demanded.
(3) when other things remain the same, the higher the price of a good, the higher is the quantity demanded.
(4) a decrease in the price of a good, shifts the demand curve of the good rightward.
(5) an increase in the price of a good, shifts the demand curve of the good leftward.
Correct Answer:
(2)
Answer Explanation:
The Law of Demand defines an inverse relationship between price and quantity demanded. Assuming ceteris paribus (all other factors remaining constant), as the price of a good increases, consumers will demand a lower quantity of it. Price changes cause a movement along the curve, not a shift.
Topic: Demand Theory Year: 2020
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