According to the law of demand, what happens when the price of a good decreases?

The law of demand states that, all else being equal, as the price of a good decreases, the quantity demanded for that good increases. This principle is rooted in the idea that consumers tend to buy more of a product when it is cheaper, as lower prices make the good more affordable and appealing to a wider range of consumers.

When prices fall, consumers typically perceive greater value, prompting them to purchase larger quantities. This response reflects both the substitution effect, where consumers may choose the less expensive good over alternatives, and the income effect, where lower prices effectively increase the purchasing power of consumers, allowing them to buy more with the same amount of money.

Understanding the implications of this law is fundamental for analyzing market behavior and consumer choices, as it illustrates a fundamental relationship between price and quantity demanded that drives demand curves.