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Questions
Mention one exception to the law of demand. Give one point only.
State two exceptions to the law of demand.
Explain three exceptions to this law of Demand.
Briefly explain one exception to the law of demand.
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Solution 1
If the consumers expect a shortage or scarcity of a particular commodity in the near future, then they would start buying more and more of that commodity in the current period even if its price is rising.
Solution 2
- Prestige Goods: Many goods have prestige value, that is, they increase the status of consumers who own or use them. These are called prestige goods. Jewellers, fashionable clothing, and luxurious cars are examples of these prestige goods. The law of demand does not apply in the case of prestige goods. The demand for prestige goods is greater when their price is high. Such goods are mainly purchased because their price is high. A fall in their price may lead the rich people to buy less because now the rich men's desire for display is not satisfied. This exception was first explained by the American economist Veblen. So, prestige goods are known as Veblen goods.
- Ignorance: Sometimes, consumers think that high-priced goods are better in quality. So, they buy more of the commodity at a higher price.
- Necessities: The law is not applicable in the case of basic necessities of life such as medicines, food grains, salt, etc. Minimum quantities of these goods have to be purchased whatever the price may be, high or low.
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RELATED QUESTIONS
Statements that explain Giffen’s paradox:
- It is an exception to the law of demand.
- It is applicable to inferior or low quality goods.
- Demand increases when the prices of inferior goods fall
- It was identified by Prof. Alfred Marshall.
State with reason whether you agree or disagree with the following statement:
When the prices of Giffen goods falls, demand for such goods rises.
State with reason whether you agree or disagree with the following statement:
There are no exceptions to the law of demand.
Questions:
- Demand Curve D1D1indicates ______ (1m)
- Demand Curve D2D2indicates______ (1m)
- Name the above diagram and explain. (2m)
State with reason whether you agree or disagree with the following statement.
When price of Giffen goods fall, the demand for it increases.
State with reason whether you agree or disagree with the following statements:
When price of Giffen goods fall, the demand for it increases.
State with reasons whether you agree or disagree with the following statements :
When price of Giffen goods fall, the demand for it increases.
'Price is an indicator of quality'. The statement applies to ______.
When price of Giffen goods fall, the demand for it increases.
State with reason whether you agree or disagree with the following statement:
When price of Giffen goods fall, the demand for it increases.
In which exception to the law of demand does the consumer equate price and quality.
“The inverse relationship between price and quantity demanded does not hold good in many cases.”
- Justify the above as Yes or No.
- If justified, explain in brief the Giffen Effect.
State with reasons whether you agree or disagree with the following statement:
When price of Giffen goods fall, the demand for it increases.
What is contraction in demand?
State two circumstances under which the demand curve slopes upwards to the right.
Give one point each of similarity and dissimilarity between Giffen goods and Veblen goods.
What are Giffen goods?
Explain the following diagram with reference to the concept of Giffen goods.
The demand curve can slope upwards from left to right. Give one argument in support of this statement.
Why do people buy more luxury goods when prices go up, defying the usual law of demand?
Which exception to the law of demand is primarily based on consumer beliefs about product quality?
What happens to the demand for necessities like salt or electricity when their prices increase?
Which situation is an example of speculation affecting demand?
