Discuss any two exceptions to the law of demand.

1.	Discuss any two exceptions to the law of demand.
Answer» Two exceptions of the law of demand are as follows: (i) Giffen goods: Giffen goods refer to the goods for which the demand increases as the price of the good increases. For example: if the price of an essential good such as wheat increases, consumers with lower incomes are left with less money to buy other expensive goods. So, they are forced to consume more wheat. (ii) Veblen goods: Veblen goods are the goods for which the demand tends to increase as the price increases. This is because some people believe to attain higher utility from goods that are priced more. For example: diamonds are considered to be Veblen goods. Veblen goods tend to have higher prestige value and mostly the luxury goods are considered as Veblen goods. Such goods are mainly considered as representative of wealth by the people.

Answer»

Two exceptions of the law of demand are as follows:

(i) Giffen goods: Giffen goods refer to the goods for which the demand increases as the price of the good increases.

For example: if the price of an essential good such as wheat increases, consumers with lower incomes are left with less money to buy other expensive goods. So, they are forced to consume more wheat.

(ii) Veblen goods: Veblen goods are the goods for which the demand tends to increase as the price increases. This is because some people believe to attain higher utility from goods that are priced more.

For example: diamonds are considered to be Veblen goods. Veblen goods tend to have higher prestige value and mostly the luxury goods are considered as Veblen goods. Such goods are mainly considered as representative of wealth by the people.

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