Exceptions to Law of Demand

1. Giffen Goods: The special kind of inferior goods on which the consumers spend a big part of their income are known as Giffen Goods. The demand for these goods increases with an increase in price and falls with a decrease in price. This phenomenon was initially observed by Sir Robert Giffen and is popularly known as Giffen’s Paradox.

For example, rice is an inferior good and wheat is a normal good. Hence, if the price of rice falls, the consumer will spend less on rice and will start buying more wheat.

2. Fear of Shortage: If the consumers expect that a commodity will become scarce in the near future, they will start buying more of it in the present, even if the price of the commodity rises because of the fear of its shortage and rise in its price in the future.

For example, in the initial period of COVID, consumers demanded more of the necessity goods like wheat, pulses, etc., even at a higher price due to their fear of general insecurity and shortage in the near future. 

3. Status Symbol or Goods of Ostentation: Another exception to the law of demand is the goods that are used as status symbols by the people.

For example, people buy goods like antique paintings because of the status symbol they want to maintain. They demand antique paintings only because their price is high. It means that if the price of antique paintings reduces, then the consumers will no longer see it as a status symbol and will reduce its demand. 

4. Ignorance: Sometimes consumers are unaware of the prevailing price of a good in the market. In such cases, they buy more of a commodity, even at a higher price. 

5. Necessities of Life: The commodities which are necessary for human life have more demand no matter whether their price reduces or increases. For example, demand for necessity goods like medicines, pulses, wheat, etc., will increase, even if their price increases.

6. Change in Weather: When there is a change in the weather, demand for some goods changes, even if their price increases. For example, demand for raincoats in the rainy season increases, even if their price increases.

7. Fashion-related goods:  The goods related to fashion are demanded more, even when their price is high. For example, if a specific model of Mobile Phone is in fashion, then consumers will buy it, even if its price increases. 

Also Read:
Theory and Determinants of Demand
Individual and Market Demand
Types of Demand
What is Demand Function and Demand Schedule?

Law of Demand states that there is an inverse relationship between the price and quantity demanded of a commodity, keeping other factors constant or ceteris paribus. It is also known as the First Law of Purchase.

There are several other factors besides the price of the given commodity that affect the quantity demanded of a commodity. Therefore, in order to understand the separate influence of one factor affecting the demand, it is essential that the other factors are kept constant. Hence, under the Law of Demand, it is assumed that other factors are constant. 

Points to Remember:

• The Law of Demand states that, everything else being constant, the quantity demanded of a good or service decreases as its price increases, and vice versa.
• The demand curve typically slopes downward from left to right, illustrating the negative correlation between price and quantity demanded.
• The Law of Demand applies both at the individual consumer level and across the entire market.
• The Law of Demand is often linked to the concept of diminishing marginal utility, which suggests that as consumers consume more units of a good, the additional satisfaction derived from each additional unit decreases.