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Exceptions To The Law Of Supply (for UPSC CSE)
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This lesson begins with the mention of factors that are exempted from adherence to the Law of Supply. It explains how the inverse relationship between the quantity supplied & the price is the opposite of that the Law of supply represents, hence this is an exception as it is against the law. The lesson analyses these exceptions from the seller's point of view, their expectations of future prices & their strategies as per the fluctuations. The other factors that the sellers' consider are weather, perishable commodities, fashionista, economic slowdown, modification in business, requirement of funds and lastly the supply of labor.

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Ayussh Sanghi
Passionate Educator - CSE / Other Govt Exams [Peep into my Unacademy Plus Courses & experience awesome learning.]

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Sir please do clear this doubt of mine :- onion is a vegetable i.e. a perishable commodity so seller's dilemma must be to bring it to market ASAP but why there is an exemption to the same in 2014? Why sellers so relied on expectation of future prices on terms of perishable goods?
Romi Singh
2 years ago
They are kept in certain kind of refrigeration...with certain management in temprature n pressure so that it does not perish!!!
sir I can't find contribute button out here. really awesome lesson sir SALUTE
Sir ab wo din dur ni hai jis din aspirants ko coachings mein huge amount pay na krna pade Salute to Unacademy
A DOUBT SIR...!!! Expectation comes under law of supply also in accordance with the previous lesson.. it shouldn't be there or what ...??
2 years ago
Both are humans whether they be the seller or buyer.. Both will have their side of expectation
So Law of Supply basically is that, profit is Directly proportional to supply if Profit(Difference between cost of production and Selling price) increases supply increases. Am I right?
Sanchary Ghosh
3 years ago
Yes, but don't think in terms of profit, think price of the good. Firms will produce even when they face losses(they may produce less) for a while if they think it'll rise again in future.

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  3. EXCEPTIONS TO LAW OF SUPPLY Just like exceptional cases to law of demand we also have some exceptions in case of supply o Let's assume, what if there is decrease in quantity supplied with rise in price and vice versa? This means it is absolutely opposite to what we have studied in case if Law of Supply o Such situations are called as exceptions to the law of supply because they go against this law

  4. FROM SELLER'S POINT OF VIEW - EXPECTATIONS OF FUTURE PRICES In case the sellers have an expectation of the prices to rise in future they adopt wait and watch policy and stop their supply of goods. o Whatever the price may be presently producers may want to supply the goods when the prices rise even more which would get them good returns. o On the contrary, if the sellers expect the prices to fall in the future then they would sell off their goods at existing lower prices in order to avoid losses.

  5. FROM SELLER'S POINT OF VIEW - WEATHER DEPENDANT PRODUCE FROM FARMS o In case of products from the farms weather plays the most important role. Such products may not obey the law of supply as they may not react to changes in prices due to heavy dependency on weather conditions.

  6. FROM SELLER'S POINT OF VIEW - PERISHABLE COMMODITIES Commodities are of different types like long lived and short lived. Not all goods can be stored for a longer period of time. o Certain commodities have verv short shelf life and they need to be made available in the market before they perish. Example: Fruits, sea produce, flowers, meat, vegetables etc. o Hence for such goods the sellers cannot simply wait for a longer time and supply the commodities in the market even when the prices are unchanged.

  7. FROM SELLER'S POINT OF VIEW -FASHIONISTA When you sell goods which are in fashion then the sellers command a higher price. On the other hand there are certain goods that go out of fashion and are no longer in demand. Such goods are supplied by the sellers at low prices in order to clear these goods.

  8. FROM SELLER'S POINT OF VIEW - ECONOMIC SLOWDOWN o The businesses pass through different economic phases like: o Slowdown o Recession Depression Hence sellers have to adapt to these changes accordingly. o During the low economic phases the sellers may not have advantage of high prices and hence during such tough times goods are sold even when they are sold lower than their costs. o Hence the law of supply would not applicable in this case.

  9. FROM SELLER'S POINT OF VIEW MODIFICATION/ CHANGE IN BUSINESS Seller can plan to diversify and enter into a entirely new segment of business by exiting/ continuing the present one o In case the present business is on the verge of close down the seller sells the goods at lower prices simply to clear the existing stock. Hence the law of supply is O Hence the law of supply is not followed.

  10. FROM SELLER'S POINT OF VIEW-REQUIREMENT OF MONEY/ FUNDS In case of a cash crunch situation, the seller may face a time when he is in immediate need of funds. In such a situation he may supply the goods in the market even at lower prices.