Explain using practical examples of any two exception of law of demand
1. Giffen goods: A Giffen good is an exception to the law of demand where the quantity demanded of a good actually increases as the price of the good increases. This goes against the typical relationship between price and demand, where higher prices usually lead to lower demand. One common example of a Giffen good is seen in certain types of inferior goods, such as low-quality staple foods like rice or bread. When the price of these goods goes up, consumers who are already struggling financially may choose to buy more of these goods because they can no longer afford more expensive alternatives.
2. Veblen goods: Veblen goods are another exception to the law of demand, where the quantity demanded of a good increases as the price of the good increases due to its perceived high status or luxury value. This runs counter to the idea that demand should decrease as prices rise. An example of a Veblen good could be luxury cars or designer clothing. As the price of these items increases, demand may also increase because consumers view them as a symbol of status and wealth, rather than just a functional product. People may be willing to pay more for these goods precisely because of their high price.