Question

Explain the exceptions to the law of supply.

Answer 1

• “When all other factors affecting supply are assumed to be constant, as price increases, supply expands and as price decreases, supply contracts”. However, for some goods there are exceptions to this law.
• Under the exceptions to law of supply, keeping other factors constant, supply of a good rises when its price falls and supply falls when price rises.

Examples of such goods are:
1. Rare goods:

• Certain goods are rare and hence even if there is a significant rise in their prices, their supply does not rise. For example, ancient coins, ancient idols, original manuscripts, old books, ancient handicrafts etc.
• An important point to note is that such goods are not produced on a daily basis. Hence,-it will be incorrect to consider these goods as exceptions to the law of supply. So, such goods should be kept out of the study of supply.

2. Perishable goods:

• Highly perishable goods like milk, milk products, green vegetables, meat, eggs, fish, ripe fruits, flowers, etc. cannot be stored for a long time.
• Hence, even if their price falls their supply will not contract because they cannot be preserved and hence must be sold.
• In current times with availability of storing such goods in cold storages even this exception is a matter of debate.