Question

What are the exceptions to the Law of Demand?

Answer 1

Exceptions to law of demand means those conditions where the law of demand does not hold. Some exceptions are:

• Giffen Goods: It was observed that when price of bread used to increase ,the worker or labour groups used to consume more of bread and less of meat because with increase in price of bread and no increase in money income they could not afford meat as meat was comparatively more expensive . So they lived by consuming more bread . This is called Giffen Paradox.
• Veblen Effect: Rich class people prefer to buy more of certain goods when price of such goods increases to show they belong to prestigious class or to confer high level of social status in society .Examples of theses goods are diamonds , prestigious stones. This is called Veblen effect. In this case as price of the commodity rises ,people feel more prestigious to buy such goods and their demand increases. This is exception to law of demand.
• The law of demand also not applies to a commodity whose quality is judged by its price. At high price people buy more of such commodity considering its quality to be good. This is also an exception to law of demand.