According to the law of demand, what will consumers do when prices are lower?

Study Economics and Personal Finance Exam. Use flashcards and multiple choice questions with hints and explanations. Prepare confidently for your test!

The law of demand states that, all else being equal, as the price of a good decreases, the quantity demanded by consumers increases. This relationship is fundamental to understanding consumer behavior in a market economy. When prices are lower, consumers find the good more attractive relative to its price, leading them to purchase more of it. This can be attributed to two key concepts: the substitution effect, where consumers may switch from more expensive alternatives to the now cheaper good, and the income effect, where lower prices increase consumers' purchasing power, enabling them to buy more. Thus, when prices drop, the natural response from consumers is to buy more of that good, affirming the correctness of the choice that states consumers will buy more when prices are lower.

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