Which of the following is an exception to the law of demand?
Options
ASpeculative goods
BConspicuous goods
CGiffen goods
DAll of the above
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Theory of Demand and SupplyPYQ - July 2021Question 29 of 20
All Questions Correct Answer
✅ Option d — All of the above
All Options:
- ASpeculative goods
- BConspicuous goods
- CGiffen goods
- DAll of the above
Detailed Solution & Explanation
To understand the exception to the law of demand, we need to consider the types of goods that do not follow the usual demand curve.
• The law of demand states that as the price of a good increases, the quantity demanded decreases, and vice versa.
• However, there are certain goods that do not follow this rule, and these are the exceptions to the law of demand.
• Speculative goods are one such exception, where an increase in price may lead to an increase in demand, as people speculate that the price will rise further.
• Conspicuous goods, also known as Veblen goods, are another exception, where an increase in price may lead to an increase in demand, as the high price is seen as a status symbol.
• Giffen goods are also an exception, where an increase in price leads to an increase in demand, as the good is an inferior good and the increase in price reduces the consumer's real income, leading to a higher demand for the inferior good.
The correct answer includes all these types of goods, as they all deviate from the usual law of demand.
• Options that only include one or two of these types of goods are incorrect, as they do not cover all the exceptions to the law of demand.
About This Chapter: Theory of Demand and Supply
Paper
Paper 4: Business Economics
Weightage
10%
Key Topics
Law of Demand/Supply, Elasticity, Consumer Behavior
One of the most important chapters in the entire CA Foundation Economics paper. It covers the Law of Demand, Law of Supply, Elasticity of Demand (Price, Income, and Cross), Consumer Behavior (Cardinal and Ordinal approaches), and the concept of Consumer Surplus. Understanding demand and supply curves and their shifts is essential for grasping market dynamics.
View Official ICAI SyllabusExam Strategy Tip
Master the difference between 'Change in Demand' (shift) and 'Change in Quantity Demanded' (movement). This distinction alone can secure 3-5 marks. Also practice Elasticity numerical calculations.
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More Questions from Theory of Demand and Supply
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Demand for a commodity refers to:
Contraction of demand is the result of:
All but one of the following are assumed to remain the same while drawing the demand curve for a commodity. Which one is it?
Which of the following pairs of goods is an example of substitutes?
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