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Fudgin [204]
3 years ago
15

What the limitations of a demand curve?

Social Studies
2 answers:
Alekssandra [29.7K]3 years ago
8 0

Answer:

Limitations of Demand Law Law of Demand indicates the inverse relationship between price and quantity demanded of a commodity. It is generally valid in most of the situations.  Prices of such commodities increases, demand does not show any tendency to contract and it negatives the law

Hope this helps :)

Ksenya-84 [330]3 years ago
4 0

Answer: Limitations of Demand Law:

Law of Demand indicates the inverse relationship between price and quantity demanded of a commodity. It is generally valid in most of the situations. But there are some situations under which there may be direct relationship between price and quantity demanded of a commodity. These exceptions are known as exceptions to the law of demand.

Consumer ignorance: Consumers ignorance induce them to buy/purchase more in the costly market. Sometimes they think like high price commodity is better in the quality. Thus with the increase in price, demand increases.

Necessary Goods: There are some commodities which are not necessities/necessary but have become necessities because of their constant use and fashion. For example: LPG gas, Petrol, etc. Prices of such commodities increases, demand does not show any tendency to contractand it negatives the law.

Conspicuous & consumption: If consumers measure the desired ability of the utility of acommodity, solely by its price and nothing else, then they tend to buy more of the commodity at higher price and less of it at lower price. Hence, there is a direct relationship between price & quantity demanded. For example: Gold ornaments, Diamonds, hair paintings.

Higher the price of the good, greater will be the prestige of the buyer in the society and vice-versa. When price falls, the commodity comes within the reach of lower class peopleand they tend to demand more because of demonstration effect.

Speculation: If people expect the price of good to rise in near future, they demand more even at higher price. And if they expect the price to fall in near future, they demand less of it even at lower price. Thus more quantity of goods is demanded at rising prices and less quantity of goods is demanded at falling prices. This seems contrary to law of demand.

Giffen Goods: These are special type of inferior goods named after Sir Robert Giffen.

According to him, when price of inferior goods increases, demand increases, & when price falls, demand falls. So there is direct relationship between price and demand.People increase preferences towards superior goods due to rise in their real income. This tendency is found in low class people. However if price increases beyond certain limit, naturally demand may fall as people prefer superior goods.

Explanation:

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