Question

True or False with Reasons:

The demand curve of a commodity may not obey the law of demand if price of its substitute rises.

Answer 1

This statement is true.

Reason:

• The law of demand describes the relationship between a commodity’s own price and quantity demanded while other factors remain constant.
• If the price of a substitute rises, demand for the commodity may increase independently of its own price, so the other-factor assumption does not hold.