Question
There are no exceptions to law of supply.
✓
Answer
No, I do not agree with this statement.
There are some exceptions to the law of s supply. Following are such cases when supply may fall with the rises in price or rise with the fall in price.(1) Labour supply : Supply of labour in the terms of hours of work is an important exception pointed out by economists. Generally when wages rise, workers work more, but after a certain point if wages continue to rise, supply of labour falls i.e. workers wish to earn more by work in for less hours and supply curve of labour would bend backwards as shown below :
In this figure as wage rate rises up to 0W, ;i supply of labor also rises up to ON, but when wage rate rises to $0W_1$, labour supply falls from ON to $0N_1$ Hence an exception.
(2) Saving : In case of savings generally it is observed that as the rate of interest rises, savings also rises but some people want to have a fixed regular income by way of interest. They may save less at a higher rate ( of interest and save more at a lower rate of interest. For example : suppose a person is interested in earning a fixed income of ? 800 p.a. then he saves ₹ 10,000/- at 8% rate of interest but when rate of interest increases to 10%, he will save only ₹ 8,000/-.
(3) Future Expectations: If the seller expects a fall in price in future, then he will supply more today even at a low price. But if he expects the prices to rise further in future he will withhold the supply today to supply more in future at a high price.
(4) Need for Cash : When the sellers are in urgent need of liquid cash, then even at a lower price they will offer more goods for sale.
(5) Rare Goods : In case of rare collections such as rare painting, old coins, antique, the law is not applicable as the supply remains fixed. The supply curve is a vertical straight line parallel to Y axis.
(6) Agricultural Goods: Supply of agricultural product is influenced by natural factors like climatic conditions, rainfall etc., which cannot be controlled by man. So in bad weather condition, even at a higher price the supply of agricultural commodities will not increase.
There are some exceptions to the law of s supply. Following are such cases when supply may fall with the rises in price or rise with the fall in price.(1) Labour supply : Supply of labour in the terms of hours of work is an important exception pointed out by economists. Generally when wages rise, workers work more, but after a certain point if wages continue to rise, supply of labour falls i.e. workers wish to earn more by work in for less hours and supply curve of labour would bend backwards as shown below :
In this figure as wage rate rises up to 0W, ;i supply of labor also rises up to ON, but when wage rate rises to $0W_1$, labour supply falls from ON to $0N_1$ Hence an exception.
(2) Saving : In case of savings generally it is observed that as the rate of interest rises, savings also rises but some people want to have a fixed regular income by way of interest. They may save less at a higher rate ( of interest and save more at a lower rate of interest. For example : suppose a person is interested in earning a fixed income of ? 800 p.a. then he saves ₹ 10,000/- at 8% rate of interest but when rate of interest increases to 10%, he will save only ₹ 8,000/-.
(3) Future Expectations: If the seller expects a fall in price in future, then he will supply more today even at a low price. But if he expects the prices to rise further in future he will withhold the supply today to supply more in future at a high price.
(4) Need for Cash : When the sellers are in urgent need of liquid cash, then even at a lower price they will offer more goods for sale.
(5) Rare Goods : In case of rare collections such as rare painting, old coins, antique, the law is not applicable as the supply remains fixed. The supply curve is a vertical straight line parallel to Y axis.
(6) Agricultural Goods: Supply of agricultural product is influenced by natural factors like climatic conditions, rainfall etc., which cannot be controlled by man. So in bad weather condition, even at a higher price the supply of agricultural commodities will not increase.
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