Question

The law of demand states that the consumption of a good decreases as its price increases, all other things equal. This "law" is actually not always true, because there are goods whose consumption increases when their price increases, all other things equal.A. True.B. False.

Answer 1

A. True.

Step-by-step explanation:

The vast majority of goods are "normal goods": goods whose consumption decreases as their price increases. This characteristic is also known as the law of demand.

However, there are two types of goods that defy the law of demand:

• Giffen goods: inferior goods whose consumption increases as price rises.
• Veblen goods: luxurious goods whose consumption increases as price rises.