University of Central Florida (UCF) ECO3223 Midterm 3 Practice Exam

The law of demand states that as the price of a good or service decreases, the quantity demanded by consumers increases, assuming all other factors remain constant. This relationship reflects consumer behavior — when goods become more affordable due to a lower price, consumers are generally willing to purchase more of those goods.

The correct choice highlights this principle by presenting the inverse relationship between price and quantity demanded. As prices drop, consumers feel empowered to buy higher quantities of goods, which is illustrated by an upward slope in demand on a graph where price is plotted on the vertical axis and quantity demanded on the horizontal axis.

In contrast, other choices do not accurately convey the principles defined by the law of demand. For example, an increase in price leading to an increase in quantity demanded misrepresents consumer behavior as typically higher prices lead to lower demand. The option mentioning constant prices suggests fluctuations in demand without indicating the key relationship with price changes, and the mention of supply remaining unchanged does not align with the law of demand, which specifically focuses on the relationship between price and quantity demanded rather than supply dynamics.