Which statement is consistent with the law of demand, holding all other factors constant?

• A. When the price of a good increases, the quantity demanded of that good decreases.
• B. When the price of a good increases, the quantity demanded of that good increases.
• C. A change in consumer income causes a movement along the demand curve for the good.
• D. When the price of a good decreases, demand decreases (the demand curve shifts left).

Answer: (A)

Verified step by step guidance

1. Understand the law of demand: It states that, ceteris paribus (holding all other factors constant), there is an inverse relationship between the price of a good and the quantity demanded. This means when the price rises, the quantity demanded falls, and vice versa.
2. Identify the difference between a movement along the demand curve and a shift of the demand curve. A movement along the demand curve happens due to a change in the good's own price, while a shift in the demand curve occurs due to changes in other factors like consumer income, preferences, or prices of related goods.
3. Evaluate each statement in the problem by checking if it aligns with the law of demand and the concept of movements versus shifts:
4. - 'When the price of a good increases, the quantity demanded of that good decreases.' This matches the law of demand and describes a movement along the demand curve.
5. - 'When the price of a good increases, the quantity demanded of that good increases.' This contradicts the law of demand.
6. - 'A change in consumer income causes a movement along the demand curve for the good.' This is incorrect because income changes shift the demand curve, not cause movements along it.
7. - 'When the price of a good decreases, demand decreases (the demand curve shifts left).' This is incorrect because a price change causes movement along the curve, not a shift; also, demand typically increases when price decreases.
8. Conclude that the statement consistent with the law of demand is the one describing an inverse relationship between price and quantity demanded, holding other factors constant.