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Exceptions to the law of demand

According to the law of demand, there exists an inverse relationship between price of a commodity and its quantity demanded. However, there are certain exceptions to this rule which are enumerated below.

Conspicuous consumption

Articles of conspicuous consumption or prestigious goods like diamonds, antique pieces etc. are demanded by very rich people for their social prestige. When the price of such goods rise, their use becomes more attractive and they are purchased in larger quantities. It is also known as the Veblen effect, named after Thorsten Veblen (an economist). Consumers under this effect measure the utility of a commodity based on the price. Higher the price, higher is the utility and vice-versa. Thus, consumers buy more of the commodity at a higher price. Diamonds are an example for this. Higher the price of diamonds, higher is the prestige value attached to them and hence higher is the demand for them.


Note: Utility means the level of satisfaction which people derive from the consumption of a commodity.

Giffen goods:

Generally, those goods which are considered inferior by the consumers and occupy a substantial place in the consumer’s budget are called Giffen goods. Sir Robert Giffen, an economist, found that the people of Britain consumed more bread when the prices went up. This was not as per law of demand. This was because they could not afford to spend on more expensive food items such as meat. Indirectly, it impacted the purchasing power of the consumer. Thus, even though the price of bread went high, it was still cheaper compared to other foods. This forced them to substitute meat and buy more bread. Thus, this is a clear exception to the law of demand and hence, the demand curve has a positive slope. When the price of bread decreases, the real income of the consumers would increase and they can afford to buy a more expensive item (here, meat), thus, the demand for bread decreases. Hence such good which exhibit direct price – demand relationship are called ‘Giffen goods’.
Example - Jowar, bajra etc.

Conspicuous necessities:

Sometimes, demand is affected by the demonstration effect i.e., by imitating the consumption pattern of a social group to which the individual belongs. These goods have become necessities of life due to their constant usage.
Example - Demand for refrigerator, TV sets etc. does not fall even if their price rises. This is because they have become necessities of life due to continuous usage, even though they are luxury goods.

Expectation about future changes in price:

In certain situations, people tend to buy more of a commodity anticipating that in future, the prices will be higher.
Example - In case of shares, if the prices are expected to increase in the future, investors will buy more number of shares now, even if the present price is higher.


In cases of emergency, people will buy the goods no matter how high the prices are.
Example - If a person has to undergo a surgery, he has to buy the medicines required even if their prices are high.


The person will buy more stocks if the price of the security is increasing and wait and don’t buy when the price is falling.

Other exceptions

  • In ignorance of the ruling price of the commodity, consumers may purchase the commodity even at high prices
  • Consumers sometimes tend to be irrational and make impulsive purchases without calculation of the price and the usefulness of the product

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