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Question 5 • * HSA 26-27 Economics

Which explains the connection between the law of demand and excess demand?

Answer

The law states that decreases in price leads to greater quantity demanded and limited supply, which occurs during excess demand.

The law states that increases in price increases leads to greater quantity demanded and limited supply, which occurs during excess demand.

The law states that decreases in price leads to greater supply and equilibrium, which occurs during excess demand.

The law states that increases in price leads to greater supply and equilibrium, which occurs during excess demand.

Explanation

The law of demand says that when a good’s price falls, the quantity consumers demand rises. If supply is limited at that lower price, the quantity demanded can exceed the quantity supplied, creating excess demand. Choice A describes this connection.

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