Question

Do you agree with the view that the law of demand need not necessarily fail in case of inferior goods?

Answer 1

Yes, it is true that the law of demand need not necessarily fail in case of inferior goods.

Inferior goods are those goods in case of which we find an inverse relationship between income and quantity demanded. Even when an inverse relationship between income and quantity demanded is established (implying a situation of negative income effect), the law of demand will not fail in case negative income effect is less than the substitution effect.

Law of demand fails only when the negative income effect is greater than the substitution effect.