Answer: Option (a) is correct.
Explanation:
Correct option: If the price level increases, we feel poorer and therefore buy less.
Law of demand says that if a price of a commodity increases as a result there will be less demand for the commodity. So, there is a inverse relationship between the price and demand for the product.
Now, suppose there is an increase in the price level. This reduces the demand for the product because it will become expensive for the buyer to purchase same amount of goods at a higher price.
Also, this rise in the price level decreases the purchasing power of the consumer which will result in lower demand for the product.
