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Exceptions to the Law of Demand – 3 Main Exceptions | Law of Demand

Exceptions to the Law of Demand

Law of Demand:

A change in price will result in a change in the quantity demanded, according to the law of demand.

In the case of an increase in price, the demand decreases, and in the case of a decrease in price, the demand increases.

In economics, the law of demand is one of the most fundamental concepts. As we observe in everyday transactions, market economies allocate resources and determine prices based on the law of supply.

Some of the Major Exceptions to the Law of Demand are as follows:

Exceptions to the Law of Demand

1) Expectations Regarding Price Change

Expectations Regarding Price Change as exception to the law of demand

A consumer buys more of a durable commodity when they expect the price to continue to rise in the future in order to avoid the pinch of an even higher price in the future.

Price increases are generally seen in pre-budget months. In anticipation of further price rises due to new levies, people purchase more storable goods.

In recent years, onions have been priced quite high. Due to fear of further price increases, consumers bought and stored more onions.

A fear of shortage may also motivate consumers to purchase and store commodities.

A product’s associated demand may increase regardless of its price because it may be removed from store shelves or cease to exist.

Example: If people think that the price of rice is likely to rise in the future, they might buy more rice to stock up for later.

2) Giffen Goods

Giffen Goods as exception to the law of demand

A Giffen good is a commodity of inferior quality that is much cheaper than its superior substitute, and is consumed as an essential item by poor households.

When the price of a Giffen good rises (while the substitute’s price remains constant), its demand will increase rather than decrease because the income effect is greater than the substitution effect in the case of a Giffen good.

It is because poor people cut their consumption of the superior substitute when the price of an inferior good increases, while their income remains the same. Thus, they are able to buy more of the inferior good.

Example: Some of the common giffengoods are bread, wheat, rice, salt etc.

3) Veblen Goods/Snob Appeal

Veblen Goods as exception to the law of demand

Veblen goods are the next exception to the law of demand. This concept was first introduced by Thorstein Veblen.

There are certain goods, known as Veblen goods, whose demand increases as their price increases. Their value increases as their price rises.

An increase in price makes these goods more useful to people. When the price of the necklace is high, it’s more desirable than one at a lower price.

Market demand is higher for cell phone models with high prices. The insights provide examples of exceptions to the law of demand.

Gold, precious stones, rare paintings, antiques, etc., are not subject to the law since they are used as status symbols, enhancing social prestige or displaying wealth and riches.

Such goods are usually bought by the rich because their prices are high, and they buy more of them when their prices rise.

Example: Some of the common veblen goods  are bread, wheat, rice, salt etc.


Exceptions to the Law of Demand: Giffen Goods, Veblen Goods etc. (2019, December 10). Toppr-guides.

Testbook. (2023, August 30). Exceptions to the law of demand – Testbook.

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