Which of the following situations best illustrates the law of demand?

• A. When the price of coffee increases, consumers buy less coffee.
• B. When consumers' income rises, they buy more luxury goods.
• C. When the price of bread remains constant, but demand increases due to population growth.
• D. When the price of tea decreases, producers supply less tea.

Answer: (A)

Verified step by step guidance

1. Step 1: Understand the law of demand, which states that, ceteris paribus (all else equal), when the price of a good increases, the quantity demanded of that good decreases, and vice versa.
2. Step 2: Analyze each option to see if it reflects this inverse relationship between price and quantity demanded.
3. Step 3: The first option states that when the price of coffee increases, consumers buy less coffee. This directly shows the negative relationship between price and quantity demanded, illustrating the law of demand.
4. Step 4: The second option relates to income changes affecting demand, which is about income effects, not the law of demand.
5. Step 5: The third and fourth options involve changes in demand due to factors other than price or supply responses, so they do not illustrate the law of demand.