Question

"Other things equal, when the price of a good rises, the quantity demanded of the good falls, and when the price falls, the quantity demanded rises." This relationship between price and quantity demanded is referred to as

Answer 1

Answer:

• Law of demand

Explanation:

Indeed, the law of demand is that the price and quantity demanded are inversely related. Ceteris paribus, the economist say. It is a latin expression that means "other things equal".

As the resources are, per definition, scarce, the consumers, ecomomic agents who buy the products, need to allocate the money among the different goods and services that the market puts at their disposal.

And they allocate the resources in a intelligent way: they "calculate" the utility of each product considering the cost. If the price increase, the ratio of utility to cost decreases and the consumer will diminish the quantity demanded for that good. If the price decrases, the utility to cost ratio increases and the quantity demanded will increase.