According to the law of demand, when the price of a good increases, all other factors remaining constant:

Question

Accepted Answer

The quantity demanded decreases. The law of demand states that there is an inverse relationship between the price of a good and the quantity demanded, assuming all other factors (ceteris paribus) remain constant. When a good's price rises, consumers tend to purchase less of it because the good becomes relatively more expensive compared to substitutes and because the higher price reduces consumers' purchasing power. This fundamental economic principle is reflected in the downward-sloping demand curve.

The claim that quantity demanded increases when price rises contradicts the law of demand and describes what would be an upward-sloping demand curve, which does not exist for normal goods. Changes in supply are governed by the law of supply (a separate relationship) and are not a direct result of price changes from the demand perspective. The suggestion that consumer income increases proportionally when prices rise has no basis in economic theory; in fact, higher prices generally reduce consumers' real purchasing power, which is one reason quantity demanded falls.

The law of demand is foundational to understanding market economics and is tested extensively on the CLEP Social Sciences and History exam. Combined with the law of supply (which states that higher prices lead to greater quantities supplied), these principles determine market equilibrium - the price and quantity at which supply and demand balance. Understanding how shifts in demand and supply curves affect equilibrium prices and quantities is essential for analyzing real-world economic phenomena such as housing markets, labor markets, and the effects of government price controls.

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