When are violations of the law of demand assumed to occur
A)commonly
B)only when goods are Giffen goods
C)only when the substitution effect dominates the income effect
D)only when the income effect dominates the substitution effect

Question

Quizplus · Accepted Answer

Violations of the law of demand are assumed to occur only when goods are Giffen goods, which are rare and unique kinds of goods that defy the usual inverse relationship between price and quantity demanded. Essentially, Giffen goods are goods for which an increase in price actually leads to an increase in quantity demanded, due to unique circumstances such as a lack of substitutes or social status considerations. In all other cases, the law of demand holds true, with increases in price leading to decreases in quantity demanded, and vice versa.

When Are Violations of the Law of Demand Assumed to Occur