6. economists generally agree that there are rare cases where the law of demand is violated justify it.
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In a speculative market (such as the stock market), a rise in the price of a commodity (such as, share) creates an impression among buyers that its price will rise further. So people start buying more of a share when its price rises. This is not truly an exception to the law of demand in the sense that the demand curve here is not upward sloping.
Hence, there is no movement along it from left to right. In fact, in a speculative market, we see a shift of a normal downward sloping demand curve— people buy more at the same price. Some people wrongly refer to this as an exception because they get confused between the two issues—movement along a demand curve and a shift of the demand curve.
Law of Demand: Exception
Snob Appeal or Veblen Good:
People sometimes buy certain commodities like diamonds at high prices not due to their intrinsic worth but for a different reason. The basic object is to display their riches to the other members of the community to which they themselves belong.
This is known as ‘snob appeal’, which induces people to purchase items of conspicuous consumption. Such a commodity is also known as Veblen good (named after the economist Thorstein Veblen) whose demand rises (fails) when its price rises (falls).
Hence, there is no movement along it from left to right. In fact, in a speculative market, we see a shift of a normal downward sloping demand curve— people buy more at the same price. Some people wrongly refer to this as an exception because they get confused between the two issues—movement along a demand curve and a shift of the demand curve.
Law of Demand: Exception
Snob Appeal or Veblen Good:
People sometimes buy certain commodities like diamonds at high prices not due to their intrinsic worth but for a different reason. The basic object is to display their riches to the other members of the community to which they themselves belong.
This is known as ‘snob appeal’, which induces people to purchase items of conspicuous consumption. Such a commodity is also known as Veblen good (named after the economist Thorstein Veblen) whose demand rises (fails) when its price rises (falls).
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There are two exceptions to the Law of Demand. Giffen and Veblen goods are exceptions to the Law of Demand. However, they are extreme cases and can be quite difficult to prove. But economists generally agree that there are rare cases where the Law of Demand is violated
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