Exception to the law of demand

1.      Giffen goods or inferior goods-Giffen Paradox: -Inferior goods are those goods whose demand does not rise even if their price falls. At times, the demand decrease, when the price of such gods falls. Sir Robert Giffen discovered this behaviour in England in relation to inferior goods such as bread. Therefore inferior goods are named after Giffen and they called ‘Giffen Goods’.

2.      Prestige Goods: There are certain goods and services, which represent ‘Status’ of ‘Prestige’for the people. Demand for these commodities is more when the price is more.

3.      Anticipation of changes in price: -If people anticipate a further rise in price, they may buy more at the existing higher price. Likewise, if people anticipating a further fall in price, they will not buy more even at the existing lower prices. They will wait for the price to fall further.

4. Price Illusion: -There is a belief among the people that the higher is the price, the better is the product and accordingly the greater is the demand for such goods.

5.      Changes in fashion: The law of demand may not work, if there is change in fashion. For example, if a product goes out of fashion and its price falls down, people will not buy more of it even at very low prices.

6.      Promotional activates: - Promotional activities such as advertising and salesmanship undertaken by seller can make the people buy more even at high prices.

7.      Changes in quality: if there is a change in the quality of the product, the law of demand may not apply. For instance, if there is improvement in quality of the product, some people my demand more even at higher price.