The law of demand states that, at any given moment, a rational consumer will:

The law of demand states that, at any given moment, a rational consumer will:

• A. Consume more only at lower prices
• B. Consume more at higher prices
• C. Consume less at lower prices
• D. Demand more goods regardless of price

Answer: (A)

The key idea is that price and the quantity a consumer chooses to buy move in opposite directions, holding everything else constant. When price falls, a fixed income buys more of the good, so the quantity demanded rises. The rational buyer also tends to substitute this cheaper option for more expensive ones, enhancing the increase in quantity purchased as price drops. So, the statement that a rational consumer will consume more when prices are lower best captures this inverse relationship between price and quantity demanded. If prices were higher, the quantity demanded would fall, which is why the other ideas—consuming more at higher prices, consuming less at lower prices, or demanding more regardless of price—don’t fit.

The key idea is that price and the quantity a consumer chooses to buy move in opposite directions, holding everything else constant. When price falls, a fixed income buys more of the good, so the quantity demanded rises. The rational buyer also tends to substitute this cheaper option for more expensive ones, enhancing the increase in quantity purchased as price drops. So, the statement that a rational consumer will consume more when prices are lower best captures this inverse relationship between price and quantity demanded.

If prices were higher, the quantity demanded would fall, which is why the other ideas—consuming more at higher prices, consuming less at lower prices, or demanding more regardless of price—don’t fit.