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There is a lady standing over there?

Is the sentence correct? Can 'lady' be used? I believe 'lady' is a polite form for woman. Therefore, I think 'woman' should replace 'lady' in the above sentence. Am I correct?
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It's also considered polite for children to always use 'lady' rather than 'woman'.
Comments  
matter of preference. Both are fine, but yes, 'lady' tends to be more formal.
 nona the brit's reply was promoted to an answer.