The law of demand states that an increase in the price of good will lead to decrease in consumer demand and visa versa.
The law of demand is one of the most fundamental concepts in economics. It works with the law of supply to explain how market economies allocate resources and determine the prices of goods and services that we observe in everyday transactions."
The law of demand states that the quantity purchased varies inversely with price. In other words, the higher the price, the lower the quantity demanded. This occurs because of diminishing marginal utility.
That is, consumers use the first units of an economic good they purchase to serve their most urgent needs first, and then they use each additional unit of the good to serve successively lower-valued ends.
for example, consider a castaway on a desert island that obtains a six-pack of bottled, freshwater washed up onshore.
1st bottle will be used to satisfy the castaway's most urgently felt need, most likely drinking water to avoid dying of thirst.
2nd bottle might be used for bathing to stave off disease, an urgent but less immediate need.
3rd bottle could be used for a less urgent need such as boiling some fish to have a hot meal, and on down to the last bottle, which the castaway uses for a relatively low priority like watering a small potted plant to keep him company on the island.
Consumer behavior is critical to navigating market trends, developing business models and creating marketing strategies.
Also, studying the effects that certain factors have on consumer demand helps investors, financial planners and economists make predictions about the stock market and the larger economy.
Hence, option A is the correct answer
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