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Economics ss2 Week 3. Exceptional Cases To Demand (Abnormal Demand) This can be defined as the curves that do not conform to the normal law of demand,

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Presentation on theme: "Economics ss2 Week 3. Exceptional Cases To Demand (Abnormal Demand) This can be defined as the curves that do not conform to the normal law of demand,"— Presentation transcript:

1 Economics ss2 Week 3

2 Exceptional Cases To Demand (Abnormal Demand) This can be defined as the curves that do not conform to the normal law of demand, ie, do not slope downward from left to right.

3 Causes Of Abnormal Demand Curves. 1.Inferior goods (giffen goods) : these are goods whose demand decrease with an increase in the income of consumers. Examples are basic foodstuff such as garri which are usually bought or consumed in larger quantities by people in the lower income or the very poor people in the society.

4 2. Articles of ostentation (luxuries) : Expensive articles such as lace materials with snob appeal attract higher demand at higher prices, hence, consumers use such goods to show off to exhibit their wealth.

5 3. fear of future rise in prices: consumer ̕̕̕̕ s may increase their demand for a commodity if they foresee further rise in prices in future. 4. Rare commodities such as antiques and old carving are valuable and therefore attract demand at higher prices and as such they have an abnormal demand.

6 4.perfectly inelastic demand : Necessary goods without close substitutes provide another type of abnormal demand the quantity demanded may remain constant irrespective of price changes eg salt.

7 price o d qquantity Perfectly inelastic demand curve.

8 5. Perfectly elastic demand : Necessary goods with many substitute may create an abnormal curve which is perfectly elastic. A decrease in price would lead to an infinitely large increase in demand, while an increase in price would make the demand fall to zero.

9 pd o quantity

10 Assignment. What is abnormal demand curve? With the aid of diagrams, explain Article of ostentation and fear of future rise in prices as causes of abnormal demand.


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