Question

State of 'law of demand'. Explain three exceptions to this law.

Answer 1

Law of Demand: The law of demand is based on the law of diminishing marginal utility. This law states the relationship between the quantity demanded and price.
According to Marshall: "The amount demanded increases with a fall in price and diminishes with a rise in price".
According to Samuelson: "Law of demand states that people will buy more at lower prices and buy less at higher prices, ceteris paribus."
Demand Schedule: According to Prof. Marshall, "Demand schedule is a list of prices and quantities." It is a tabular statement of price-quantity relationship between two variables. The demand schedule in the table represents the different quantities of commodities that are purchased at different prices during a certain specified period.

Price of Oranges (Rs per kg	Demand by Consumers (in per kg)
15	2
12	3
9	4
6	5
3	6

Demand curves: The demand curve is a graphic statement or presentation of quantities of a commodity, which will be demanded by the consumer at various possible prices at a given moment of time. Demand curve does not tell us the price. It only tells us how much quantity of good would be purchased by the consumer at various possible prices.
Exceptions to the law:
i. War or Emergency: During the period of war, if there is fear of shortage, people may start buying for hoarding and building stocks, even at high prices. On the other hand, if there is depression, they will buy less at low prices.
ii. Articles of Distinction: Articles of distinction command more demand when their prices are high. These articles include jewellery, diamonds, gems, costly carpets etc. The rich people demand more of such commodities even at high prices. In case their price goes down, they no longer remain the articles of distinction and so have less demand.