Correct Option: D. A decrease in price leads to an increase in quantity demanded. Explanation of the Correct Answer: The demand curve is a graphical representation of the relationship between the price of a good or service and the quantity demanded by consumers. It typically slopes downward from left to right, which reflects the law of demand. The law of demand states that, all else being equal, as the price of a good decreases, the quantity demanded for that good increases, and vice versa.

1. Understanding the Demand Curve:
2. The downward slope of the demand curve indicates an inverse relationship between price and quantity demanded. This means that when the price goes down, consumers are more willing and able to purchase more of the good.
3. For example, if the price of a popular smartphone drops from $800 to $600, more consumers may decide to buy it because it is now more affordable, leading to an increase in the quantity demanded.
4. Why Option D is Correct:
5. When the price decreases, consumers perceive the good as a better deal, which encourages them to buy more. This is a fundamental principle in economics known as the substitution effect and the income effect:
   • Substitution Effect: As the price of a good falls, it becomes cheaper relative to other goods, leading consumers to substitute away from more expensive alternatives.
   • Income Effect: A lower price increases the purchasing power of consumers, allowing them to buy more of the good with the same amount of money.

Why the Other Options are Incorrect:

• Option A: An increase in price leads to an increase in quantity demanded:
• This statement contradicts the law of demand. If the price increases, consumers will typically buy less of the good because it is more expensive. Therefore, this option is incorrect.
• Option B: An increase in price leaves the quantity demanded unchanged:
• This option suggests that price changes do not affect quantity demanded, which is also incorrect. The demand curve's downward slope indicates that price changes do affect quantity demanded. An increase in price generally leads to a decrease in quantity demanded, not leaving it unchanged.
• Option C: A decrease in price leads to a decrease in quantity demanded:
• This option is the opposite of what the demand curve indicates. A decrease in price should lead to an increase in quantity demanded, not a decrease. Therefore, this option is also incorrect.

Summary of Key Points:

• The demand curve slopes downward, indicating an inverse relationship between price and quantity demanded.
• A decrease in price leads to an increase in quantity demanded due to the substitution and income effects.
• The law of demand states that higher prices lead to lower quantities demanded and vice versa.
• Understanding the demand curve is crucial for analyzing consumer behavior in response to price changes.

This foundational concept is essential for grasping more complex economic theories and market dynamics.