The trend shown on the graph above is best explained by which of the following economic concepts?

• A. The law of supply, which states that as price decreases, quantity supplied increases
• B. The concept of diminishing marginal utility, which states that total utility increases as more units are consumed
• C. The law of demand, which states that as price decreases, quantity demanded increases
• D. The principle of opportunity cost, which states that the cost of a good is the value of the next best alternative

Answer: (C)

Verified step by step guidance

1. Step 1: Identify the key relationship shown in the graph, focusing on how quantity changes as price changes.
2. Step 2: Recall the economic concepts provided and their definitions: the law of supply, the law of demand, diminishing marginal utility, and opportunity cost.
3. Step 3: Understand that the law of demand states that when the price of a good decreases, the quantity demanded increases, which is typically shown as a downward-sloping demand curve.
4. Step 4: Compare this with the law of supply, which states that quantity supplied increases as price increases, usually an upward-sloping supply curve, so it does not match the trend described.
5. Step 5: Conclude that the trend in the graph is best explained by the law of demand, because it directly relates price decreases to increases in quantity demanded.