Question

Explain how the following phenomena is an exception to the law of demand

Expectations about future prices.

Answer 1

If the price of a commodity is rising today and it is likely to rise more in the future, people will buy more even at the existing higher price and store it up. They will do this in order to avoid the pinch of higher prices in the future. Similarly, when the consumers anticipate a large fall in the price of a commodity in the future, they will postpone their purchase even if the price falls today so as to purchase this commodity at a still lower price in the future.