Exception to the law of Demand / when demand curve
slopes upward / a positive slope demand curve
1) Giffen Goods:
Law
of demand may not operate in many situations.
These are known as the exception
to the law of demand, where demand curve may not have negative slope.
A positively sloped demand curve shows with
rise in price, quantity demanded rises and with fall quantity demanded falls.
Discussed below are the various exceptions.
Discussed below are the various exceptions.
1) Giffen Goods:
Named after economist Sir Robert Giffen, he
said giffen goods are those inferior goods on which the consumer spends a large
part of his income and the demand for which falls with a fall in their price.
for example - maize and jowar are considered to be inferior food grains for average consumers.
for example - maize and jowar are considered to be inferior food grains for average consumers.
As
the price of maize falls, real income rises, know the consumer may afford to
purchase superior foods like wheat or rice.
Since there is a limit to intake of
food, quantity demanded for maize would be lower.
Similarly,
if the price of maize rises, poor consumers will be forced to spend more on the
purchase of maize because it is essential for their survival.
They cannot
afford to purchase the same quantity of superior food items that they purchased
earlier because they would be left with lesser money to spend on other commodities.
Thus,
they will increase the demand for maize at the cost of wheat or rice.
