Exceptions to The Law of Demand

Exceptions to The Law of Demand

From the analysis of The Law of Demand, it is clear that in ordinary conditions, demand increases on decrease in price of a commodity and the demand curve falls downwards from left to right. But there are some exceptions to the law of demand and sometimes, even on decrease in prices, the demand does not increase or on the contrary with increase in prices demand also increases. Under such opposite conditions, the curve does not slope downwards but rises upwards.

  1. Possible Scarcity of Commodity in Future

    On any possibility of a commodity becoming scarce or non-available in future, the demand of that commodity increases even if its prices increase.
    For example – On a possibility of imposition of curfew, the demand of commodities increases, even after an increase in its prices.

  2. Necessities of Life

    The bare necessities of life like, food etc. do not show any significant decrease in demand even on an increase in price. Similarly, even on decrease in their prices, their demand does not increase.

  3. Articles of Status and Prestige

    Such commodities which are a symbol of status in the society like, diamonds, jewellery etc. show an increase in demand, on increase in their prices because this shows off the wealth and distinctness of rich persons.

  4. When the Amount Spent on the Commodity is a Very Small Portion of Total income

    Any change in prices of such commodities do not affect its demand, like – salt.

  5. Ignorance and Illusion of Consumer

    Sometimes the consumers, due to their ignorance or illusion, consider a decrease in prices as a fall in the quality of that commodity and they start purchasing lesser of that commodity, on its price reduction.

  6. Articles of Fashion and Tradition

    There is hardly any affect on demand of change in price of fashionable or traditional commodities,

  7. Commodities of Special Brand and Trademark

    When a customer gets used to commodities of a particular brand or trademark, then any increase in the prices of the commodity of that brand does not effect his demand.

  8. Giffin’s Paradox

    Some modern economists consider Giffin’s Paradox as the only exception to the law of demand. According to the economist named Giffin, if the price decreases of some lower quality foods, their demand also decrease instead of increasing. This is called Giffin’s Paradox. For example – a person of low income consumes low quality of cheap food grains. If in the market the price of barley (low quality food grains) decreases and the price of wheat (high quality food grain) remain stable, then the real income of that person will increase.
    That person will like to utilise his increased income on wheat (high quality food grain) instead of on barley. In such a condition, the demand of barley will decrease even after a decrease in its price. This is also called Negative Income Effect. Giffin’s Paradox is applicable on only those low quality goods on which the consumer spends a big portion of his income.

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