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Class : 11
Unit : Economics

What are the exception/limitations to the law of supply?

Ans : Law of supply means higher the price, higher the supply and lower the price, lower the supply. But there are some cases where law of supply does not apply which is known as exceptions to the law of supply. i) Auction sales:- When a firm wants to clear it’s old stock in that case he uses auction sale. In case of auction sale, supplier will supply more goods at a lower price. The main objective of auction sale is to clear the old stock. In this case law of supply does not apply. ii) Price expectation:- When a supplier expects that the price of commodity will increase in future, current supply of the commodity will decrease even at high price and vice versa. In this case law of supply does not supply. iii) Change in other factor:- Change in habit, taste, fashion, weather etc. also effect the supply of commodity. iv) Agricultural goods:- Law of supply is not applicable in agricultural goods. The supplies of such goods are operated by seasonal factor rather than price. So the farmers cannot wait for the application of law of supply. v) Perishable goods:- Goods which have very short life time and becomes useless after certain period of time are called perishable goods. Such goods must be supplied in the market at right time, whatever be the price. For example, vegetables like tomato, cauliflower, etc. The supply of perishable goods doesn’t apply law of supply. vi) At the time of depression:- Depression is that situation in which the economic activities goes down side. For example, production, employment consumption, etc. decreases. So the supplier supplies more quantity even at law price due to fear of downfall in the economy.