Exceptions of the Law of Demand
According to the law of demand, quantity demanded will increase with the fall in price and vice-versa. But the law will not be applicable when the non-price factors affecting demand are changed. In this situation, demand cannot be affected by the change in price or demand will be affected without the change in price. The exceptions of the law of demand are as follows.
1. Prestigious goods 2. An exception of price change
3. Fear of shortage of goods 4. Giffen goods
5. Necessary goods 6. Ignorance of consumers
7. Trade cycle 8. Goods without alternative
9. Habitual goods 10. Special occasions
1. Prestigious goods:- The achievement of goods like diamond, emerald, gold etc increase the prestige or special value of their owners. So, they are called prestigious goods. The utility of such goods is calculated by the price paid for them. Their demand increases with the rise in price as their social value increase with the rise. But their value decreases in wealth demonstration when their price falls and demand decreases with the fall in price. Hence, the law of demand will not be applicable in the case of prestigious goods.
2. Exceptions of price change:- If the price of a commodity is expected to increase in near future, present demand will increase without price change of the commodity. On the contrary, if there is an expectation of price change is the exception of the law.
3. Fear of shortage of goods:- If there is the fear of the shortage of goods, present demand will increase without a change in price. In the situation of fear of shortage, the law of demand will not be applicable as demand is affected without price change.
4. Giffen goods:- Goods o low quality, which are consumed by lower income classes, are known as Giffen or inferior goods. According to Sir Robert Giffen, demand of such goods decrease with the rise in price. The reason is that most of the consumers leave their consumption as their price fallls. But their demand increase with the rise in price. Hence, the law will not be applicable for inferior goods.
5. Necessary goods:- Consumption and demand of necessary goods of human life can not be decreased. Since their consumption level remains constant, their demand is not affected by price change. Hence, the law of demand will not be applicable for necessary goods.
6. Ignorance of consumers:- Price change of the commodity does not affect the demand if the consumers are ignorant about market situation like running market price, quality of goods etc. In that situation, decrease in price can not increase the demand and vice-versa. Hence, the law will not be applicable at the situation of the ignorance of consumers.
7. Trade cycle:- Consumer’s income level becomes low at the time of economic depression and fall of price can not increase the demand. On the contrary, money income is sufficient at the time of economic properity or boom. In this situation, law of demand will not be applicable as demand is affected without price change.
8. Goods without alternative:- Consumption level of goods having no alternative remains constant at all level of price. Change in price can not influence the demand of such goods. Thus, the law of demand will not be applicable for the goods without alternatives.
9. Habitual goods:- Demand of habitual goods of the consumer is not affected by the prcie change. As their consumption is being habitual, increase in their price can not decrease the demand and vice-versa. Thus, the law of demand will not be applicable for habitaul goods.
10. Special occasions:- Demand of some goods is affected by special occasions like season, festival etc. If these occasions are favorable for demand, their demand many increase even though their price may increase. If the occasions are unfavorable, demand may decreases in lower price also. Hence, the law will not be applicable in special occasions.