In microeconomics, what does the law of demand state about the relationship between the price of a good and the quantity demanded, holding other factors constant (ceteris paribus)?

• A. The quantity demanded of a good is unaffected by changes in its price, ceteris paribus.
• B. As the price of a good rises, the quantity demanded of that good also rises, ceteris paribus.
• C. A change in the price of a good causes the demand curve itself to shift left or right, ceteris paribus.
• D. As the price of a good rises, the quantity demanded of that good falls, and as price falls, quantity demanded rises, ceteris paribus.

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, assuming all other factors remain constant (ceteris paribus).
2. Recognize that 'quantity demanded' refers to the specific amount of a good consumers are willing and able to buy at a given price.
3. Recall that the law of demand states there is an inverse relationship between price and quantity demanded: when price increases, quantity demanded decreases; when price decreases, quantity demanded increases.
4. Note that this relationship is represented graphically by a downward-sloping demand curve, where the price is on the vertical axis and quantity demanded on the horizontal axis.
5. Understand that changes in the price of the good cause movements along the demand curve (changes in quantity demanded), not shifts of the demand curve itself, which are caused by other factors.