Exceptions to Law of Demand

Law of demand is a concept of economics according to which other things remaining the same as the price of good rises demand for good will decline and when the price of goods declines demand for goods will increase. In real life as there is no rule which applies to all and there are always some exceptions in the same way in the case of law of demand also there are some exceptions; let’s look at some of the law of demand exceptions –

The first and foremost exceptions of law of demand are Giffen goods which are low priced products, example of Giffen good is potato or bread  and due to their low price as the price of such goods increases the demand for goods also increases because they are used by poor people and so if poor had $10 and he or she spends $5 on Giffen goods and rest on high-quality goods now if the price rises to $8 then poor will spend all $10 on Giffen goods because $8 is needed for survival and with $2 cannot be used to buy expensive products and hence they are also spent on Giffen goods.

Another exception happens when the consumer is ignorant so if the consumer does not have any idea about the price of good he or she will buy even when the price of goods has increased and hence the law of demand will not be applicable in such cases.

Another exception of law of demand is with regards to prestigious goods like silver and art paintings because since these goods are of prestigious nature people tend to associate prestige with the price of this goods and when the price rises they will buy and if price declines they will not buy as according to them a lower price carries lesser prestige.

In case of emergency situations like floods, earthquake, war and so on the law of demand will fail because in such situations people are willing to pay any price for goods as in such situations question is not of money but the question is of survival and when the question of survival comes nor price is high enough as far as individuals are concerned.

Change in consumer taste and fashion can also throw law of demand off the track because once the consumer taste change against the good than it is very difficult for any good to be back in demand even when the company reduces its price. For example due to the advent of LCD and LED people have shifted their demand from normal television to these products and if the company reduces the price of normal television by half then also then there will be no increase in demand.

Another exception of law of demand is when the consumer expects future change in the price so for example if consumer expects the price of goods to rise in future then he or she will demand more of a product even when the price of goods rises and conversely when he or she expects price to decline in future then he or she will demand less of a product even when the price of goods falls.

As one can see from the above that law of demand has many exceptions and one should have an idea about these exceptions before making any conclusion on the basis of the law of demand principal of economics.

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