Consular Fellows Program Test (CFPT) Practice Test

According to the law of demand, what is the relationship between price and quantity of goods?

Inverse Reciprocal Converse Equal

Correct Answer:

Inverse

Explanation:

The law of demand states that there is an inverse relationship between the price of a good and the quantity demanded. This means that as the price of a good decreases, the quantity demanded by consumers tends to increase. Conversely, when the price of a good increases, the quantity demanded generally decreases. This negative correlation is a fundamental principle in economics, rooted in consumer behavior and the substitution effect. In scenarios where prices are high, consumers may seek substitutes or reduce their consumption, leading to a decrease in demand. When prices fall, the good becomes more attractive, and consumers are likely to buy more of it. Therefore, the correct response reveals the core dynamic of how pricing influences consumer demand in the marketplace.

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