The Law of Demand is a frequently used expression that states that the prices and quantities are inversely related. However, certain peculiar circumstances preclude the application of the law of demand. The product will demand more at a higher price and less at a lower price in those circumstances. Exceptions To Law Of Demand assignment help service is here to help.
Exceptions To Law Of Demand
In those instances, demand curves slope upward, indicating a positive relationship between price and quantity demanded, as illustrated in the following figure:
When the price increases from OP to OP1, the quantity demanded increases from OQ to OQ1, and vice versa. DD is a demand curve that is out of the ordinary or abnormal. The following is a list of some of the law of demand’s exceptions.
(1) Veblen Effect: Veblen demonstrated that extremely wealthy individuals desire certain goods in exchange for their social prestige. The price of these goods rises, their use becomes more appealing, and they purchase them in greater quantities. When the price of diamonds increases, demand from the wealthy class increases as well. Such goods were more affordable; the wealthy would refrain from purchasing them entirely.
(2) The Giffen Paradox: Sir Robert Giffen demonstrated that when the price of low-quality goods rises, poor people will demand more of them and less when the price falls. Inferior goods are those that people buy in large quantities when they are poor and small amounts when they become wealthy. For example, poor people spend a disproportionate amount of their income on coarse grains and a negligible amount on rice. As a result, they will purchase less rice whenever the cost of coarse grains increases. Increase in price increases must purchase additional coarse grains to close the resulting gap. As a result, an increase in the price of coarse grains increases the quantity purchased. This phenomenon is known as the ‘Giffen Paradox.’ The law of demand is not applicable in these instances.
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