Which statement best explains the law of demand?

• A. A change in the price of a good shifts the demand curve because consumer preferences change.
• B. As consumer income rises, the demand curve for any good always shifts to the right.
• C. Ceteris paribus, as the price of a good rises, the quantity demanded rises because the good becomes more valuable.
• D. Ceteris paribus, as the price of a good rises, the quantity demanded falls, and as the price falls, the quantity demanded rises.

Answer: (D)

Verified step by step guidance

1. Understand that the law of demand describes the relationship between the price of a good and the quantity demanded, holding other factors constant (ceteris paribus).
2. Recognize that the law of demand states that when the price of a good rises, the quantity demanded decreases, and when the price falls, the quantity demanded increases.
3. Distinguish between a movement along the demand curve (caused by a change in the good's own price) and a shift of the demand curve (caused by changes in other factors like income or preferences).
4. Note that a change in price does not shift the demand curve but causes a movement along the curve, reflecting changes in quantity demanded.
5. Evaluate each statement by checking if it correctly reflects the inverse relationship between price and quantity demanded without confusing shifts in demand with movements along the demand curve.