Plzzz ans this ques. P 110 law of demand is violated when. OPTIONS :( A.) income effect is negative. (B). substitution effect is negative. ( C.) negative income effect > substitution effect. (D.) negative income effect
Dear Student,
Law of demand is violated in option (C) when income effect > substitution effect.
Income effect is greater than substitution effect in GIFFEN GOODS . Giffen goods are the exceptions to the law of demand. GIffen goods are those highly inferior goods when even if their prices decrease, there will a decrease in the demand of those goods. Giffen goods show a high negative income effect which means if there is an increase in the income of the buyer there will be the decrease in the demand of these goods.
So, option (c) is correct.
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Law of demand is violated in option (C) when income effect > substitution effect.
Income effect is greater than substitution effect in GIFFEN GOODS . Giffen goods are the exceptions to the law of demand. GIffen goods are those highly inferior goods when even if their prices decrease, there will a decrease in the demand of those goods. Giffen goods show a high negative income effect which means if there is an increase in the income of the buyer there will be the decrease in the demand of these goods.
So, option (c) is correct.
Hope this information will clear your doubts on this topic.
If you have any more doubts just ask on the forum and our experts will try to help you out as soon as possible.
Regards