Which statement best explains the law of demand? O The quantity demanded by consumers increases as prices rise, then decreases as prices fall.
O The quantity demanded by consumers decreases as prices rise, then increases as prices fall.
O The quantity demanded by producers increases as prices ise, then decreases as prices fall.
O The quantity demanded by producers decreases as prices rise, then increases as prices fall.

The correct answer is The quantity demanded by consumers decreases as prices rise, then increases as prices fall.

Explanation:

The demand or desire of consumers to buy a certain product is widely affected by the price of the desired product. Indeed, a low price leads to a higher demand because consumers can buy more units of the same product and this motivates them to buy more; while a high price decreases the demand.

For example, if donuts normally cost $1 and their price decreases to $0.5 this will increase the demand or number of donuts people want people they can buy more units and the product can be afforded by more people. On the opposite, if the price increases to $2 people will buy fewer donuts because these would not be affordable for some people, and in general people will spend more money on each donut.