A Level Economics AQA Practice Exam

Which of the following best describes consumer behavior according to the Law of Demand?

1. Consumers are less likely to buy when prices rise

2. Consumers will always demand the same quantity regardless of price

3. Consumers prefer to buy more at higher price levels

4. Consumers will only buy goods when prices are set high

The correct answer is: Consumers are less likely to buy when prices rise

The answer correctly identifies the essence of the Law of Demand, which states that, all else being equal, there is an inverse relationship between the price of a good and the quantity demanded. Therefore, when prices rise, consumers are less likely to purchase the good, leading to a decrease in quantity demanded. This behavior occurs because higher prices typically make a good less affordable, prompting consumers to either seek substitutes or decrease their overall consumption. The other options do not align with the Law of Demand. For instance, stating that consumers will always demand the same quantity regardless of price ignores the fundamental principle that price changes influence purchasing decisions. Additionally, claiming that consumers prefer to buy more at higher price levels contradicts the principle of diminishing marginal utility, where the value derived from additional units typically lessens as prices rise. Lastly, the notion that consumers will only buy goods when prices are set high is contrary to the basic economic understanding that higher prices can restrict demand.