In the context of movement along a demand curve, how do lower prices tend to affect the quantity demanded?

• A. They shift the demand curve to the right by increasing demand.
• B. They shift the demand curve to the left by decreasing demand.
• C. They decrease the quantity demanded, representing a movement up along the demand curve.
• D. They increase the quantity demanded, representing a movement down along the demand curve.

Answer: (D)

Verified step by step guidance

1. Understand the difference between a movement along the demand curve and a shift of the demand curve. A movement along the demand curve occurs when the price of the good changes, affecting the quantity demanded, while a shift of the demand curve happens when other factors (like income or preferences) change, altering demand at every price.
2. Recall the Law of Demand, which states that, ceteris paribus, when the price of a good decreases, the quantity demanded increases, and when the price increases, the quantity demanded decreases.
3. Recognize that a lower price does not shift the demand curve itself; instead, it causes a movement along the existing demand curve to a higher quantity demanded.
4. Express this concept mathematically: if the demand function is \(Q_d = f(P)\), then a decrease in \(P\) leads to an increase in \(Q_d\), moving down along the same demand curve.
5. Conclude that lower prices increase the quantity demanded, representing a movement down along the demand curve, rather than shifting the demand curve to the right or left.