What does the Law of Demand indicate about the relationship between price and quantity demanded?

The Law of Demand describes the inverse relationship between the price of a good or service and the quantity demanded by consumers. It states that, all other factors being equal, when the price of a good rises, the quantity demanded by consumers tends to fall. Conversely, when the price decreases, the quantity demanded tends to increase.

This principle is fundamental in economics, as it explains consumer behavior regarding different pricing levels. It captures the idea that consumers are more likely to purchase a product when it is cheaper and will purchase less of it when it becomes more expensive, primarily due to the substitution effect and income effect.

Thus, the correct answer illustrates this core principle: as price increases, the quantity demanded decreases, reflecting the typical reaction of consumers in the marketplace.