Which principle suggests that demand varies inversely with price?

The principle that suggests demand varies inversely with price is the Law of Demand. This law states that, all other factors being equal, as the price of a good or service decreases, the quantity demanded increases, and conversely, as the price increases, the quantity demanded decreases. This relationship reflects consumer behavior where lower prices typically lead to a greater willingness to purchase, while higher prices tend to discourage buying.

The Law of Demand operates on the basic assumption of ceteris paribus, meaning 'all other things being equal,' allowing us to isolate the relationship between price and demand without the influence of other variables. This principle is foundational in economics as it helps explain how markets operate and guides pricing strategies for businesses.

In contrast, the Law of Supply asserts a direct relationship between price and quantity supplied, while the Equilibrium Principle focuses on the balance between supply and demand in a market. The Utility Principle, on the other hand, pertains to the satisfaction gained from consuming goods and services, rather than the relationship between price and demand. Thus, the Law of Demand uniquely encapsulates the idea of demand changing inversely with price.