Exceptions to the Law of Supply

Every law has its own limitations and exceptions. Hence the law of supply of is not free from this general rule. In certain occasions, the law of supply does not work properly. These exceptions are explained below.

Rare Goods

The law of supply does not operate in case of extremely scarce and rare commodities like the painting of big artist or rare art & literature which cannot be reproduced. The supply of these goods are strictly limited. Hence whatever may be the price, more cannot he supplied.

Labour Supply

The law of supply is partially applicable in case of labour supply. When wage rate rises and reaches a certain critical limit, supply of labour does not increase after that level. Instead in begins to fall as wage rate rises. This is because labourers prefer leisure in place of work after wage rate reaches the critical level. 

Clearance Sale

When the seller wants to clear existing stock of good’s he supplies more at a lower price. This is called clearance sale and the process goes on till the stock is exhausted. In this particular situation, the law of supply does not work. Generally this situation arises when the seller wants to quit a particular business to seek profit elsewhere. 

Auction Sale

 The law of supply does not operate in case of auction sale. Generally the highest bidder purchase the good meant for auction. Here only a limited quantity is offered for auction sale. 

Need for Cash

When the seller needs cash immediately, he supplies more even at lower price. Generally the seller sells more at lower price to a customer who is prepared to purchase a bulk of commodities.

Change in non-price Determinants

The law of supply does not work if non-price determinants of supply like technique of production, expectation of future prices of related goods, factor prices undergo a change.