In this article we will discuss about the exceptions to the law of demand with the help of suitable diagrams.

First, the economist Veblen (1857-1929) has pointed out that there are some articles of conspicuous consumption like highly expensive models of automobiles, costly ornaments set with jewels like diamond, expensive clothing’s, etc. which, their users think, have aristocratic values because of their prohibitive prices, and higher the price the higher would be their status orientation.

That is why, as their prices increase or decrease, their demand will also increase or decrease and the law of demand would have an exception in the case of these goods. This exception to the law of demand here is known as the Veblen Effect.

Second, it is seen sometimes, especially in the markets for agricultural commodities, that the price monotonically decreases or increases over a period. In such cases, as price decreases the buyers reduce their quantity purchased because they think that the price would decrease more in the near future and then they might buy at a lower price.


Similarly, as price increases, the buyers would increase their purchase as they apprehend that the price would increase more in the near future. Therefore, here it find exceptions to the law of demand.

Third, the phenomena of monotonically decreasing and increasing prices are frequently observed in the share markets. Therefore, in these markets also it is found that the demand for shares decreases or increases as their prices decrease or increase, giving excep­tions to the law of demand.

Fourth, in the case of goods of addiction like tobacco products or alcohol, are found excep­tions to the law of demand. For, if the prices of these goods increase, their users are not able to reduce their use. Also, since at their current prices they collect all they require, they do not have to increase their purchase when their prices fall.

Fifth, an Irish economist Sir Robert Giffen has observed that the law of demand does not work in the case of the main food item of the poorer classes, like potato in Ireland. This is because if the price of this item, say, potato, increases, a household, to keep its purchase intact, would have to spend more on potato.


As a result, money to buy some other food items would become too small to serve the purpose, and whatever money left, would be diverted to purchase more of potato. Thus, as the price of potato rises, its purchase would also rise.

Similarly, if the price of potato decreases, the household would have to spend less on potato. As a result, money to buy some other food items would increase and now the household might attempt to substitute these items for potato. Thus, as the price of potato falls, its purchase would also fall.

The main food item, like potato, of the poorer classes, is called the Giffen good, after Sir Robert Giffen (1837-1910). The Giffen good is an inferior good. As its price increases (decreases) and the real income of the buyer decreases (increases), the demand for the good increases (decreases).

Some areas of exception to the law of demand. In these cases, as the price of a good decreases or increases, the quantity demanded of it also decreases or in­creases. In such cases, the individual demand curve for the good would be positively sloped, i.e., it would slope upwards towards right like the demand curve, dd, given in Fig. 1.2.

Positively Sloped Demand Curve

Vertical Straight Line Demand Curve

In some cases of exception to the law of demand, as the price of the good changes, its demand would remain unchanged. In such cases, the demand curve for the good would be a vertical straight line like dd in Fig. 1.3.

A very common example of such a good may be that of table salt. It should be a good which is extremely necessary, its price should be relatively very low and expense for it must be a very small fraction of the total expense of a household.