The demands which react differently from normal demand pattern are called exceptional demands and so these have entirely different types of demand curves. Sometimes because of abnormal circumstances, the law of demand does not operate and the people may buy large quantities of commodities even at an increased price
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Some of the exceptional conditions are described below:
1. Ignorance of the Consumers:
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Under such circumstances, the people are not aware of the actual price of the commodity and they may purchase more quantities even at an increased price.
2. The Law does not apply to Conspicuous Consumption or Prestige goods:
There are certain goods which have only prestige value and law of demand does not apply to it. This limitation is associated with the name of Thorstein Veblen. He propounded the doctrine of conspicuous consumption.
According to Veblen, some consumers measure the utility of a commodity entirely by its price. Higher is the price of a commodity greater is its utility and higher is the prestige value of it in the society.
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Diamond, Jeweller, high valued textiles and air-conditioned cars are examples of prestige goods. People purchase them for demonstrating their vanity and aristocracy.
If the price of such articles goes down they will lose their prestige value and demand for such commodity will also go down. Here the law of demand is not applicable.
3. The Law does not apply to Giffen Goods:
Giffen goods are inferior goods. In case of Giffen goods when the price of commodity rises its quantity demanded also increases and vice- versa. There is direct price-demand relationship.
This was pointed out by Sir Robert Giffen in 19th century in Ireland. People were very poor in Ireland. They spent major portion of their income on potatoes and less on the superior commodity like meat.
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When the price of potatoes went up, they were compelled to spend more on a given quantity of potato. They did not have money to purchase meat as before. Therefore, they stopped the consumption of meat and substituted meat for potato. So they spent more on potato and demanded more of it.
After the name of Robert Giffen such goods which are staple food are known as Giffen good. In case of such goods higher the price, the demand is higher. It is also called Giffen Paradox. In such case the demand curve slopes upward to the right not downward.
4. Speculation:
The speculation is an exception to the law of demand. Under such a situation, whenever the price increases, it is presumed that the prices will further increase and under such speculation, people will go on purchasing more and more quantities of goods. Thus, the rise in price of commodity may not cause a reduction in demand of that commodity. This is clearly an exception to law of demand.
5. Necessaries of Life:
In case of necessaries of life like wheat, rice, medicine etc., people purchase more even at a higher rate. Therefore, demand for such commodities is considered inelastic.
6. Abnormal Socio-economic Conditions:
In abnormal socio-economic conditions like war, famine, epidemics, floods, inflation, depression, price control, rationing etc., it is possible that the law of Demand may not follow the general course because in such conditions due to psychological factors, consumers like to stock goods in advance even at a higher price.
7. Other things never remain constant:
Law of demand will operate when other things like income, taste, fashion, prices of substitutes and complements remain constant. The law only considers the price-demand relationship but other things never remain constant and therefore even if prices are higher the quantity demanded will be higher.