Which of the following is NOT an exception to the 'Law of Demand'?
Show answer & explanation
Correct answer: D
Explanation
Correct Answer:
Substitute goods
Explanation:
According to the Law of Demand, when price increases, demand decreases and vice versa. However, some exceptions include Giffen goods, conspicuous goods, and speculative goods.
Substitute goods are NOT an exception to the law of demand. Instead, they follow normal demand behavior where the demand for one good increases when the price of its substitute rises.
Key Points:
Giffen goods are an exception to the law of demand.
Conspicuous goods may also behave as exceptions.
Speculative goods can act as exceptions.
Substitute goods follow normal demand theory, not an exception.
Additional Facts:
Substitute goods can replace each other (e.g., tea and coffee).
Giffen goods may show an upward-sloping demand curve.
Luxury goods often show unusual demand behavior.
Important Questions:
Q1: What are substitute goods?
Ans: Goods that can be used in place of each other
Q2: Which goods are exceptions to the law of demand?
Ans: Giffen, conspicuous, and speculative goods
Q3: Example of substitute goods?
Ans: Tea and coffee