Explain the Law of Demand with the help of diagram. State its exceptions.
The Law of Demand states that other things remaining constant, the quantity demanded of a commodity expands with fall in its price and contracts with a rise in its price.
So, there is an inverse relationship between price and quantity demanded of a commodity. This is explained with the help of an imaginary table and the curve which is based on imaginary data:
Exceptions to the Law The law will not hold good under following circumstances:
(i) Conspicuous consumption The Law of Demand will not apply in case of costly items such as diamonds. These commodities will be demanded, even if the prices have gone very high.
(ii) Conspicuous necessities Certain things become the necessity of modern life, so we have to purchase these goods inspite of their price. The demand of television sets and automobiles has not gone down inspite of the increase in their price.
(iii) Ignorance If the consumer is not aware of the competitive price of the commodity, he may purchase more of the commodity even at higher price. Such ignorance of the buyers makes the Law of Demand ineffective.