(i) The GifFen’s Paradox : A fall in the price of inferior goods (Giffen Goods) tends to reduce its demand and a rise in its price tends to extend its demand. This phenomenon was first observed by SIR ROBERT GIFFEN, popularly known as Giffen’s paradox. He observed that the working class families of U.K. were compelled to curtail their consumption of meat in order to be able to spend more on bread.
Mr. Giffen, British economist, observed that rise in the price of bread caused the low paid British workers to buy more bread. These workers lived mainly on the diet of bread, when price rose, as they had to spend more for a given quantity of bread, they could not buy as much meat as before. Bread still being comparatively cheaper was substituted for meat even at its high price.
(ii) Fear of Shortage : The people may buy more of a commodity even at higher prices when they fear of a shortage of that commodity in near future. This is contrary to the law of demand. It may happen during times of war and inflation and mostly in the case of goods which fall in the category of necessities of life like sugar, kerosene oil etc.
(iii) Conspicuous Necessities : Another exception occurs in use of such commodities as due to their constant use, have become necessities of life. For example, inspite of the fact that the prices of television sets, refrigerators, washing machines, cooking gas, scooters etc., have been continuously rising, their demand does not show any tendency to fall. More or less same tendency can be observed in case of most of other commodities that can be termed as ‘Upper- Sector Goods’.
