What are the exception to the Law of demand? |
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| Ans : According to law of demand, demand for commodity is more at lower price and demand for commodity is less at higher price. But this law sometimes does not apply in every case and situation. The situation in which law of demand does not hold is known as exceptions. Some exceptions are explained below:-
i) Giffen goods:- Giffen goods are those goods whose demand increases when there is increase in price and demand decreases when there is fall in price. These goods are special type of inferior goods which are mostly consumed by poor household. When price of giffen goods increases, the demand for giffen goods will increases because income of the consumer will be insufficient to purchase other superior goods. So in this case law of demand does not hold true.
ii) Expectation regarding future price:- When consumer expects that there is continuous rise in price of commodity, they buy more of it despite of increase in price due to which demand increases at high price. On the other hand, when consumer expects a continuous decrease in price of commodity, they postpone their purchase and demand decreases with fall in price.
iii) Prosperity and depression:- At the time of prosperity, the purchasing power of consumer increases. So people buy more even when price increase.
At the time of depression, the purchasing power of consumer decreases. So people buy less even when price decreases.
iv) Ignorance:- If the consumer is not aware of the competitive price of commodity, he purchases of the commodity even at high price. So law of demand does not hold in case of ignorance.
v) Change in fashion:- When there is arrival of new fashion in the market, demand for such new fashion will be more even at high price. So this makes law of demand in effective.
vi) Price illusion:- The buyer is under illusion that if we pay more, the quantity of such goods are high. Such people will buy more when price increases.
vii) Prestigious goods:- Prestigious goods are those goods which serves exclusive status, enhance social prestige or display wealth and richness. Therefore, demand for goods like gold, diamond, rare paintings, etc. increases with rise in price. This is also against f law of demand.
viii) Basis of necessary goods:- When the price of necessary goods increases there is increase in demand of necessary goods. The demand for necessary goods such as salt, medicine etc. remains unchanged for all level of price. It means increase or decrease in price does not bring any change in demand. This is against the law of demand.
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