Assuming ceteris paribus, what principle behind the law of demand is illustrated by a downward-sloping demand curve?

• A. As the price of a good decreases, the quantity supplied increases.
• B. As consumer income increases, the demand for all goods increases.
• C. As the price of a good increases, the demand for substitutes decreases.
• D. As the price of a good decreases, the quantity demanded increases.

Answer: (D)

Verified step by step guidance

1. Understand that the law of demand states there is an inverse relationship between the price of a good and the quantity demanded, holding other factors constant (ceteris paribus).
2. Recognize that a downward-sloping demand curve graphically represents this inverse relationship, showing that as price decreases, quantity demanded increases.
3. Identify the principle behind this behavior as the 'substitution effect' and the 'income effect,' which explain why consumers buy more of a good when its price falls.
4. Note that the other options relate to supply behavior, changes in income, or effects on substitutes, which are different concepts and do not explain the downward slope of the demand curve.
5. Conclude that the correct principle illustrated by the downward-sloping demand curve is: as the price of a good decreases, the quantity demanded increases.