Exceptions or Limitations of law of demand


Exceptions or Limitations of the law of demand

1. Articles sold under two brand names:
The articles may be sold under two brand names such as Shikhar and premium Shikhar cigarettes. The consumers buy more of the higher priced brand although the products are identical.

2. Inferior goods/ Giffen goods:
This exception was pointed out by Robert Giffen who observed that when the price of bread increased, the low paid British workers purchased a lesser quantity of bread, which is against the law of demand. Thus, in the case of Giffen goods, there is an indirect relationship between price and quantity demanded.

3. Price expectation:
When the consumer expects that the price of the commodity is going to fall in the near future, they do not buy more even if the price is lower. On the other hand, when they expect a further rise in the price of the commodity, they will buy more even if the price is higher. Both of these conditions are against the law of demand.

4. If the shortage is feared:
When people feel that a commodity is going to be scarce in the near future, they buy more of it even if there is a current rise in price. For example: If people feel that there will be a shortage of cooking gas in the near future, they will buy more of it, even if its price is high.

5. Change in income:
If the consumers’ income increases, they will demand more commodities even at a higher price. On the other hand, they will demand less even at a lower price if there is a decrease in their income. It is against the law of demand.

6. Change in fashion:
If the commodity goes out of fashion, people do not buy more even if the price falls. For example, People do not purchase old fashioned clothes even though they've become cheap. Similarly, people buy fashionable goods although price rises.

7. Necessary goods:
In case of basic necessities of life such as salt, rice, medicine, etc. the law of demand is not applicable as the demand for such necessary goods does not change with the rise or fall in price.

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