Multiple choice

Which of the following is an exception to the Law of Demand?

  1. Conspicuous Goods

  2. Conspicuous Necessities

  3. Speculative Goods

  4. All of the above
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D Correct answer
Explanation

Conspicuous Goods- Articles of prestige value are demanded by only the rich and these articles become more attractive when their prices go up. Such articles do not conform to the usual Law of Demand.

Conspicuous Necessities- The demand for certain goods is affected by the demonstration effect of the consumption pattern of the social group to which an individual belongs. These goods due to their constant usage have become necessities of life. For instance, when price of TV and AC have been continuously rising, demand of these articles do not show any tendency to fall.

Speculative Goods- In speculative market, more will be demand when prices are rising and lesser will be demand when prices decline. This leads to failure of Law of Demand.

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