Being the diligent students that you are, your mind would have already been ingrained with the law of demand, which states that there is an inverse relationship between quantity and price.
Stated differently, the higher the price, the lesser the quantity demanded, and vice versa.
There are, however, some exceptions to the law of demand. This exception causes the demand curve to be upward sloping, rather than downward sloping.
The following are exceptions to the law of demand:
1. Veblen goods
2. Consumer expectations
3. Highly essential goods
4. Giffen goods
5. Significant change in consumer income relative to price change
Veblen goods
Veblen goods are named after American economist Thorstein Veblen who first observed the concept of conspicuous consumption.
A Veblen good is a luxury good that does not obey the law of demand.
One characteristic of Veblen goods is that people demand them because of their high price, which represents high status.
Veblen items are seen as status symbols. As a result, when their price is high, people value them.
This means that more will be demanded as the price increases.
iPhone 13 pro max, for example, is a Veblen good for many Nigerians.
People preferences for owning such devices increases as price increases because owning an iPhone 13 pro max confer higher status and prestige on the owner
Veblen goods usually have an upward sloping demand curve indicating that people demand more of them as price increases.
Consumers expectations of higher prices or lower prices.
Consumers will sometimes buy things even if their prices rise, especially if they expect the price to rise higher.
For example, if the price of rice increases from N400 to N500 and consumers expect that the price of rice will further increase to N1000.
Even if the price has increased, some people may still buy more rice now to avoid paying the higher price of N1000
As a result, more rice will be demanded although the price increases. This violates the law of demand.
Conversely, if the price of a commodity decreases and consumers expect the price to further decrease, they will not buy the commodity now to avail the opportunity of buying it at a much lower price.
This, once again, violates the law of demand which state that more of a commodity is demanded when the price decreases.
Highly essential goods
The demand for some commodities that are deemed essential for a living may defy the law of demand.
Water, for example, is a commodity that no one can live without.
Accordingly, if the price of water rises, demand will likely remain unchanged because people cannot afford to do without it.
Therefore, this violates the law of demand.
Giffen goods
This is a concept introduced by Scottish economist Sir Robert Giffen.
A Giffen good is a rare type of inferior good whose demand rises with rising prices and falls with falling prices.
To put it another way, a giffen good is an inferior good whose demand is directly proportional to price, resulting in a demand curve that is positively sloped.
Giffen goods are typically non-luxuriuous goods with no close substitutes, resulting in a lower substitution effect.
This means that if the price rises, the consumer will be unable to substitute it for another good.
A significant change in consumer income
Even if the price of goods rises, there may still be demand for more of it if consumer income rises significantly.
For example, if James' income rises by 60% while the price of his book rises by 2%, he may still buy the same or more books because his income has increased significantly relative to his price.
As a result, if a consumer's income rises significantly relative to the price of a good, the law of demand may not hold.