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Explain the exception to the Law of demand?
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Explain the exception to the Law of demand?
Law of demand states that as the price decreases the quantity demanded increases and when the price increases the quantity demanded decreases
exception
article of social distinction
irrational judgement
inferior good
exception
article of social distinction
irrational judgement
inferior good
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Explain the exception to the Law of demand?
Exception to the Law of Demand
The Law of Demand states that when the price of a good or service increases, the quantity demanded for that good or service will decrease. Conversely, when the price of a good or service decreases, the quantity demanded will increase. However, there are certain circumstances that can lead to an exception to this law.
Giffen Goods
Giffen goods are a type of inferior good where an increase in the price of the good leads to an increase in the quantity demanded. This is because the good is considered a necessity and takes up a large portion of a consumer's income. As the price of the good increases, consumers are forced to allocate more of their income towards purchasing it, which leaves them with less money to spend on other goods. In this case, the increase in the price of the good leads to a decrease in the consumer's purchasing power, making them more likely to purchase even more of the good in an attempt to compensate for the loss of purchasing power.
Veblen Goods
Veblen goods are luxury goods that are considered status symbols. The demand for these goods increases as the price increases because consumers associate the high price with high quality and exclusivity. In this case, the price of the good is seen as a signal of prestige, which makes consumers more likely to purchase the good as the price increases.
Supply and Demand Shocks
In certain situations, the Law of Demand may not hold true due to sudden changes in supply or demand. For example, if a natural disaster reduces the supply of a certain good, the price may increase even though the quantity demanded is still high. Similarly, if a new technology is developed that makes a good more desirable, the demand for the good may increase even if the price increases as well.
Conclusion
While the Law of Demand is generally a reliable principle, there are exceptions where the price of a good or service may increase while the quantity demanded also increases. These exceptions are important to consider when analyzing market trends and consumer behavior.
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Explain the exception to the Law of demand?
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Explain the exception to the Law of demand? for Commerce 2025 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about Explain the exception to the Law of demand? covers all topics & solutions for Commerce 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Explain the exception to the Law of demand?.
Explain the exception to the Law of demand? for Commerce 2025 is part of Commerce preparation. The Question and answers have been prepared according to the Commerce exam syllabus. Information about Explain the exception to the Law of demand? covers all topics & solutions for Commerce 2025 Exam. Find important definitions, questions, meanings, examples, exercises and tests below for Explain the exception to the Law of demand?.
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