Answer in detail :
Explain the law of supply. Write its exceptions.
According to the law of supply, quantity supplied of a commodity is positively related to the price of the commodity, other things remaining constant. In other words, when the price of a commodity rises (or falls), then the quantity supplied will increase (or decrease), other things remaining unchanged.
The following are the exceptions to the law of supply:
- Artistic Goods- The artistic goods are goods of high quality such as, paintings, etc. do not support law of supply. This is because such goods are limited availability
- Perishable Goods- The perishable goods such as, milk, meat, etc. do not support law of support the law of supply. This is because these products have very-short period of life, therefore more units of these goods are sold at lower prices.
- Underdeveloped countries- Law of supply is not applicable in the underdeveloped and backward countries which faces lack of sufficient productive resources.
- Agricultural Sector- The law does not apply to the agricultural products due to high degree of uncertainty attached to them. For example, no matter whatever be the price, the supply of wheat cannot be increased in the short run, in the event of any natural calamity or crop failure.