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    Question

    Which of the following statements accurately describes the relationship between price and quantity demanded/supplied, considering potential exceptions?

    A The law of demand always holds true, stating that as price increases, quantity demanded decreases, with no exceptions. Correct Answer Incorrect Answer
    B The law of supply always holds true, stating that as price increases, quantity supplied increases, with no exceptions. Correct Answer Incorrect Answer
    C The law of demand generally holds true, but exceptions exist for Veblen goods, Giffen goods, and situations of speculation or emergency. Correct Answer Incorrect Answer
    D The law of supply generally holds true, but exceptions exist for perfectly inelastic goods, where quantity supplied remains constant regardless of price changes. Correct Answer Incorrect Answer
    E Both the law of demand and the law of supply have numerous exceptions, making them unreliable for predicting market behavior. Correct Answer Incorrect Answer

    Solution

    The law of demand is a fundamental principle in economics, but it's important to recognize that there are exceptions where the relationship between price and quantity demanded doesn't hold. Veblen goods (luxury items) and Giffen goods (inferior goods) are examples where demand may increase with price. Additionally, in situations of speculation or emergency, consumers may behave irrationally, leading to deviations from the law of demand.

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