The economic law stating that as price increases, the quantity demanded decreases and vice versa is known as which?

• A. Law of Supply
• B. Demand
• C. Substitute Good
• D. Law of Demand

Answer: (D)

The basic idea here is the inverse relationship between price and the quantity demanded, assuming other factors stay the same. The law of demand states that when the price of a good rises, people buy less of it, and when the price falls, they buy more. This creates the downward-sloping demand curve and is driven by the substitution effect (more expensive goods push buyers toward alternatives) and the income effect (higher prices reduce purchasing power). The other options don’t fit as well: the law of supply describes the opposite relationship for producers (higher price leads to more being supplied); a substitute good is a related concept that affects demand for another good, not the general price–quantity demanded rule; and simply “demand” refers to the broader relationship, not the specific inverse rule.