Question

Explain the exceptions to the law of demand using distinction between substitution and income effect

Answer 1

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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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Answer 2

Exceptions to the law of Demand :-

Giffen Goods

Veblen Goods.

Extra Information :-

DEMAND -

Demand is the quantity of certain goods which are desired by the consumers from the market.

THE LAW OF DEMAND -

This is a inverse relationship between the prices of goods and it's demand . If the price of the goods rise then their demand will fall . In other words , The higher the price , The lower the quantity demanded. Here, Demand curve is downward from left to right .

Exceptions to the law of Demand :-

There are two exceptions to the law of demand, Giffen goods and Veblen goods.

Giffen Goods:- Giffen goods are the goods for which the demand increases as the price increases and demand falls when the price decreases. Example - Essential food staple - Rice.

Veblen Goods :- These goods are kind of luxury goods for which the demand increases as the price increases. These goods are like status symbol. Example - Jewelry, Costly cars.