Which statement is accurate about demand and price movements?

Which statement is accurate about demand and price movements?

• A. Demand rises as price falls
• B. Demand rises as price rises
• C. Demand unrelated to price
• D. Demand only relates to supply

Answer: (A)

The big idea here is the inverse relationship between price and quantity demanded. When the price of a good falls, more people are willing and able to buy it, so the quantity demanded goes up. This happens because lower prices increase purchasing power (income effect) and make the good relatively cheaper than substitutes (substitution effect). So saying that demand rises as price falls captures this basic pattern of how buyers respond to price changes. Why the other statements don’t fit: increasing price typically reduces quantity demanded, not increases it. Demand isn’t unrelated to price, since price is the key factor that drives how much people are willing to buy. Finally, demand is not the same as supply—demand concerns buyers’ willingness to purchase at given prices, while supply concerns producers’ willingness to sell.

The big idea here is the inverse relationship between price and quantity demanded. When the price of a good falls, more people are willing and able to buy it, so the quantity demanded goes up. This happens because lower prices increase purchasing power (income effect) and make the good relatively cheaper than substitutes (substitution effect). So saying that demand rises as price falls captures this basic pattern of how buyers respond to price changes.

Why the other statements don’t fit: increasing price typically reduces quantity demanded, not increases it. Demand isn’t unrelated to price, since price is the key factor that drives how much people are willing to buy. Finally, demand is not the same as supply—demand concerns buyers’ willingness to purchase at given prices, while supply concerns producers’ willingness to sell.