Question

As a regulator of demand, how does price influence demand?

Options

• Price and demand are completely unrelated

• A higher price leads to lower demand, and vice versa

• Price increases demand irrespective of its level

• A higher price leads to higher demand, and vice versa

Answer 1

Price acts as a regulator of demand: a higher price leads to lower demand, and vice versa. This inverse relationship allows firms to influence the quantity demanded by adjusting the price of their product.