Question

Which of the following are true or false?

a) Car and Petrol are substitutes
b) Law of demand operates in every situation

• A. Both (a) and (b) are true
• B. (a) is true, but (b) is false
• C. (a) is false, but (b) is true
• D. Both (a) and (b) are false

Answer 1

Answer: (D)

Both (a) and (b) are false

a) Car and Petrol are substitutes: This is a false statement since car and petrol are complementary goods because as the price of petrol rises, the demand of car falls and vice-versa.

b) Law of demand operates in every situation- This statement is false as in case of Giffen goods, law of demand does not operate as the demand for Giffen goods rise as its price increases.