Question

What's wrong with the following statement? The law of demand tells us that when the demand for a product increases, its price will increase

Answer 1

The statement that “when the demand for a product increases, its price will increase” is contradictory to the law of demand. The law of demand states that all other things constant, price and quantity demand of any good are inversely related to each other. When the price of a product increases, the demand for it will fall.

It is related to consumer choice behavior when there is a change in price. When the price of a product rises, it leads to a fall in the demand of that product. This is a general consumer choice behavior. Consumers will buy less of something when its price rises. They'll buy more when its price falls.