What happens when the price of a good increases?

When the price of a good increases, the quantity demanded typically decreases. This is a fundamental principle in economics known as the law of demand. As prices rise, consumers tend to buy less of the good because it becomes more expensive relative to their budget or compared to other goods. The decrease in quantity demanded reflects a negative relationship between price and the quantity of the good that consumers are willing to purchase.

In contrast, the other options do not accurately describe the outcome of an increase in price. For instance, an increase in price usually motivates producers to supply more of the good to take advantage of higher potential revenues, leading to an increase in quantity supplied. Demand refers to the overall willingness and ability of consumers to purchase a good at various price levels, and it does not increase when the price of a good goes up. Therefore, the correct understanding of these economic principles explains why an increase in the price of a good leads to a decrease in the quantity demanded.