The law of demand indicates that as the price of a good decreases, what happens?

The law of demand states that, all else being equal, there is an inverse relationship between the price of a good and the quantity demanded. Specifically, when the price of a good decreases, consumers tend to buy more of that good, leading to an increase in the quantity demanded. This behavior can be attributed to the fact that lower prices make goods more affordable and attractive to consumers, thus encouraging them to purchase larger quantities.

In this context, it is important to understand that this principle only applies to the quantity demanded rather than a shift in the overall demand curve. When the price decreases, the movement along the demand curve corresponds to an increase in the quantity that consumers are willing and able to purchase.

Other options do not accurately describe this relationship:

• A decline in quantity demanded is inconsistent with the law of demand because it directly contradicts the observed behavior when prices fall.
• While a decrease in price might encourage suppliers to respond by increasing the quantity supplied, that pertains to the law of supply rather than demand.
• Lastly, a decrease in demand would imply that the entire demand curve shifts leftward due to factors unrelated to price changes, which misinterprets the specific scenario where only the price changes.