Exceptions to the Law of Demand

The law of demand is not applicable in certain cases:

(a)     The law of demand is violated in case of veblen or conspicuous goods. Some goods are purchased for snob appeal, ostentation and prestige value. As a result higher their price, the greater their demand, Diamonds, antique pieces and rare paintings are purchased more at a high price due to an increase in the prestige value attached to them.

(b)     Giffen goods or inferior goods are another category of goods that depict direct price - demand relationship. A giffen good is an inferior commodity, much cheaper than its superior substitutes, consumed by poor households as an essential commodity. An increase in the price of such good increases its demand. Inferior quality rice, bajra and potatoes fall in this category.

(c)     The law of demand does not apply in case of speculation Consumers tend to purchase more at a high price expecting the prices to rise in future. This is usually due to sudden scarcity of goods especially in case of necessities and shares in stock market. 

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