The law of demand states that there is a negative relationship between the price of a good and the quantity demanded ceteris paribus.
1. Explain using practical example any two (2) exceptions to the law of demand.
1. Veblen goods: Veblen goods are luxury goods that people demand more of as the price increases. This is because the high price of the good is seen as a status symbol, and people are willing to pay more to display their wealth and social status. For example, luxury designer handbags, high-end designer clothing, and luxury watches are all considered Veblen goods.
2. Giffen goods: Giffen goods are inferior goods that people consume more of as the price increases. This is because as the price of the good rises, consumers have less money to spend on other higher-quality goods, so they end up buying more of the inferior good. A classic example of a Giffen good is basic staple foods like rice or bread for lower-income households. If the price of rice increases, people may buy more rice because they can no longer afford more expensive food items.