EXCEPTIONS OF LAW OF DEMAND

Demand is that specific quantity of a commodity which the consumer purchases at a specific price during a specified time period.

ACCORDING TO FERGUSON

“Demand refers to the quantities of commodity that the consumers are able and willing to purchase at each possible price during a period of time, other things being equal.”

EXCEPTIONS OF LAW OF DEMAND

Exceptions of law of demand state the areas where law of demand does not apply. The law of demand fails when any of its assumption does not gets fulfilled. The main exceptions of law of demand are as follows:

VEBLEN GOODS OR ARTICLES OF DISTINCTION

Such commodities which are considered as symbol of status and known as Articles of Distinction. This exception was first explained by the American Economist Veblen. That is why; these articles or goods are known as Veblen goods. Such commodities are generally consumed by the rich. The higher the price of these goods, the more will be their demand and vice versa. This makes the demand curve slopes upward.

INFERIOR GOODS

The law of demand applies only to the normal goods. This law does not apply to the inferior goods. Inferior goods are those goods which are relatively cheap in nature. If the prices of these goods rise, their demand also rises. And if the price of these goods decreases, their demand falls.

IGNORANCE OF CONSUMER

Many times, the consumer thinks that the cheap commodity is inferior commodity. Hence the consumers purchase less if its price is low. On the contrary, if the price rises, the consumer takes it as superior in quality and purchases more of it. This makes the demand curve slopes upward and law of demand fails.

ABNORMAL CIRCUMSTANCES

The law of demand does not apply in abnormal circumstances like war, floods, earthquake etc. In such circumstances, the demand for necessary commodities rises even though their price is higher. On the other hand, the demand for other than necessary commodities falls even though their price is low.

GIFFEN GOODS

The concept of these goods was given by Sir Robert Giffen. At his name, these goods are known as Giffen Goods. Giffen goods are highly inferior goods, showing a very high negative income effect. As a result, when price of such commodities falls, their demand also falls, even when they happen to be relatively cheaper than other goods. This is popularly known as ‘Giffen Paradox’.    

In short, it can be said that the law of demand applies only when all its assumption holds good. Otherwise it fails.

Also Study	Also Study	Also Study	Also Study
Theory of Demand	Law of Demand	Demand Function	Exceptions of law of demand
Elasticity of demand	Change in demand	Price elasticity of demand	Law of demand Vs Elasticity of demand
Factors affecting price elasticity of demand	Production function	Short run vs long run production function	Law of variable proportions
Types of demand	Managerial economics	Characteristics of managerial economics	Scope of managerial economics
Utility analysis	Law of diminishing marginal utility	Law of equi marginal utility	Consumers Equilibrium
Indifference curve analysis	Consumer equilibrium using indifference curve analysis	Relationship between TP, AP and MP	Law of increasing returns
Law of diminishing returns	Law of constant returns	Returns to Scale	Economies and diseconomies of scale
Concept of costs	Relationship between AC and MC	Traditional theory of costs	Modern theory of costs
Explicit vs Implicit costs	Revenue	Perfect competition	Monopoly
Price discrimination	Difference between perfect competition and monopoly	Perfect Vs Monopolistic competition	Monopoly and monopolistic competition
Product differentiation strategy	Monopolistic competition	National Income in India	Measurement of national income in India
Consumption function	Keynes Psychological law of consumption