In view of the coronavirus pandemic, we are making LIVE CLASSES and VIDEO CLASSES completely FREE to prevent interruption in studies
Home > Fundamentals of Economics and Management - CMA > Supply > Exceptions of Law of supply
Supply

Exceptions of Law of supply

The law of supply states that the sellers are willing to sell more goods at a higher market price of a commodity and vice-versa. In other words, when the price of a commodity increases its supply increases and when the price of a commodity decreases its supply decreases, other things being constant. Thus, there is a direct relationship between the price of a commodity and its supply. However, there are some exceptions of law of supply.

Exceptions of Law of supply

There are certain circumstances under which the law of supply may not hold true. It means that the price of the commodity and its supply may not move in the same direction. Thus, the exceptions to the law of supply are as follows

  • Closure of business
  • Agricultural products
  • Monopoly
  • Competition
  • Perishable Goods
  • Rare goods
  • Out of fashion goods

exceptions of law of supply

1. Closure of business

When a business is on the verge of closure, the seller may sell the goods even at low prices in order to clear the stock. Thus, in this case, the law of supply shall not hold true.

Browse more Topics under Supply

2. Agricultural products

We know that land is a limited resource and thus the agricultural produce can also not be increased beyond a certain level. Hence, even if the prices increase the supply cannot be increased.

3. Monopoly

Monopoly is a situation where there is only a single seller of a commodity. Thus, he is the price maker and has control over the prices.

In such a case, the law of supply may not apply as he may not be willing to increase the supply even if the prices are high.

 

4. Competition

When there is a cut-throat competition in the market, the sellers may sell more quantity of goods even at low prices. This is a situation where the law of supply will not apply.

5. Perishable Goods

A seller is willing to sell more goods that are perishable in nature even at low prices because if they remain unsold they will yield only loss.

Read more about Exceptions to Law of Demand here in detail

6. Rare goods

The goods that are rare such as artistic or precious goods have a limited supply. The supply of these goods cannot be increased according to their demand or rising prices.

Thus, even if their price increases their supply cannot be increased. In this case, also the law of supply shall not apply.

7. Out of fashion goods

The latest goods that are in fashion have high prices. But, the out of fashion goods have low prices.

The sellers may sell them out of fashion goods even at low prices. As these will become dead inventory and also in order to realize the amount invested in the inventory.

Thus, the law of supply gets negated.

Questions on Exceptions of Law of supply

Q.How will the law of demand apply in the case of labor?

Ans.

In the case of the supply of labor, the supply curve is backward bending. Initially, if the wage rate is high or increasing then the supply of labor will also increase. But, later the supply of labor shall decrease because due to the higher wage rate in initial years the labor may require more leisure. Thus, the law of supply shall not hold true in this case.

Share with friends

Customize your course in 30 seconds

Which class are you in?
5th
6th
7th
8th
9th
10th
11th
12th
Get ready for all-new Live Classes!
Now learn Live with India's best teachers. Join courses with the best schedule and enjoy fun and interactive classes.
tutor
tutor
Ashhar Firdausi
IIT Roorkee
Biology
tutor
tutor
Dr. Nazma Shaik
VTU
Chemistry
tutor
tutor
Gaurav Tiwari
APJAKTU
Physics
Get Started

Browse

Supply

Leave a Reply

avatar
  Subscribe  
Notify of

Browse

Supply

Stuck with a

Question Mark?

Have a doubt at 3 am? Our experts are available 24x7. Connect with a tutor instantly and get your concepts cleared in less than 3 steps.
toppr Code

chance to win a

study tour
to ISRO

Download the App

Watch lectures, practise questions and take tests on the go.

Get Question Papers of Last 10 Years

Which class are you in?
No thanks.