Multiple Choice
Which statement best describes the law of demand for a typical good, holding all other factors constant (ceteris paribus)?
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3. The Market Forces of Supply and Demand
The Demand Curve
Multiple Choice
According to the law of demand, what happens to the quantity demanded of a good when its price rises, holding all other factors constant?
A
Quantity demanded decreases.
B
Demand increases (the demand curve shifts right).
C
Quantity demanded remains unchanged.
D
Quantity demanded increases.
Verified step by step guidance1
Recall the law of demand, which states that, ceteris paribus (holding all other factors constant), there is an inverse relationship between the price of a good and the quantity demanded.
Understand that when the price of a good rises, consumers typically buy less of that good because it becomes more expensive relative to other goods or their budget constraints tighten.
Recognize that this change is a movement along the demand curve, not a shift of the demand curve itself, since other factors affecting demand are held constant.
Therefore, an increase in price leads to a decrease in the quantity demanded, illustrating the downward slope of the demand curve.
Summarize that the correct interpretation of the law of demand is: when the price rises, the quantity demanded decreases, holding all else constant.
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