Which explains the connection between the law of demand and excess demand? A. The law states that decreases in price leads to greater quantity demanded and limited supply, which occurs during excess demand.
B. The law states that increases in price increases leads to greater quantity demanded and limited supply, which occurs during excess demand.
C. The law states that decreases in price leads to greater supply and equilibrium, which occurs during excess demand.
D. The law states that increases in price leads to greater supply and equilibrium, which occurs during excess demand.
The correct answer is A.
Explanation: The law of demand indicates that when prices decrease, the quantity demanded increases. In the case of excess demand, prices are typically lower than equilibrium, leading to increased consumer demand while the supply remains limited or insufficient to meet this demand. Therefore, the relationship hinges on the idea that lower prices result in more demand but not necessarily more supply available, causing excess demand.