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Limitation / Exception of Law of Demand

Limitation/Exception of Law of Demand:

Though as a rule when the prices of normal goods rise, then the demand decreases but there may be a few cases where the law may not operate.

  • Prestigious goods: there are certain commodities like diamond, sports cars etc., which are purchased as a mark of distinction in society. If the prices of these goods are rises, the demand for them may increase instead of falling.
  • Price exception: if people expect a further rise in the price of particular commodity, they may buy more in spite of rise in price. The violation of the law in this case is only temporary.
  • Ignorance of the consumer: if the consumer is ignorant about the rise in price of goods, he may buy more at a higher price.
  • Geffen goods: if the price of basic goods (potatoes, sugar, etc.) falls then the demand for those goods also falls, because by the surplus income through falling price people buy superior goods.