While studying with a classmate, Manfred, for Exam 1 in ECO 315, Manfred claims the price of lumber decreased recently causing people to buy more lumber. Manfred says that it makes sense that demand increases when the price decreases because Dr. Peterson taught us the law of demand. Is Manfred correct? Why or why not?

Yes. This is one of the basic principles of economics, demand increases when price decreases.

Yes. Manfred must be correct since he used words that sound like economic terms.

No. This is a complete misunderstanding because the law of demand does not state that the demand curve shifts when price changes.

No. While Manfred is correct the law of demand states that demand increases when price decreases, he is wrong that lumber prices decreased.