Certified Supply Chain Professional (CSCP) Practice Exam

According to economic principles, what happens to the demand for a product as its price decreases?

1. Demand for the product increases

2. Demand for the product decreases

3. Demand remains constant

4. Demand is unaffected by price changes

The correct answer is: Demand for the product increases

When the price of a product decreases, it generally leads to an increase in the quantity demanded by consumers. This relationship is rooted in the law of demand, which states that price and quantity demanded are inversely related. As prices fall, more consumers find the product affordable and may choose to purchase it instead of other alternatives, resulting in an increase in demand. It is important to note that the overall demand curve represents the relationship between price and quantity demanded. A decrease in price can shift the quantity demanded along the curve, illustrating that consumers are willing to buy more at the lower price. This increase can also vary based on factors such as consumer preferences and the availability of substitute products. The other options do not accurately reflect the economic principle that underlines the relationship between price and demand. An increase in demand due to lower prices is a fundamental concept in economics that applies broadly across markets.