Law of Supply - Exceptions to the Law of Supply

Exceptions to the Law of Supply :

1) Supply of labour :

Labour supply is the total number of hours that workers to work at a given wage rate. It is represented graphically by a supply curve. In case of labour, as the wage rate rises the supply of labour (hours of work) would increase. So supply curve slopes upward. Supply of labour (hours of work) falls with a further rise in wage rate and supply curve of labour bends backward. This is because the worker would prefer leisure to work after receiving higher amount of wages. Thus, after a certain point when wage rate rises the supply of labour tends to fall. It can be explained with the help of a backward bending supply curve. The Table explains the backward bending supply curve of labour.

In the Table, supply of labour (hours of work) is shown on X axis and wage rate per hour is shown on the Y axis. The curve SAS represents backward bending supply curve of labour. Initially, when the wage rate is ₹100 per hour, the hours of work is 5. The total amount of wages received is ₹500. When wage rate rises from ₹100 to ₹ 200, hours of work will also rise from 5 hours to 7 hours and total amount of wages would also rise from ₹ 500 to ₹1400. At this point, labourer enjoys the highest amount i.e. ₹1400, and works for 7 hours. If wage rate rises further from ₹ 200 to ₹ 300, total amount of wages may rise, but the labourer will prefer leisure time and denies to work for extra hours. Thus, he is ready to work only for 6 hours. At the point A, the supply curve bends backward, which becomes an exception to the law of supply.

2) Agricultural goods :

The law of supply does not apply to agricultural goods as they are produced in a specific season and their  production depends on weather conditions. Due to unfavourable changes in weather, if the agricultural production is low, their supply cannot be increased even at a higher 
price.

3) Urgent need for cash :

If the seller is in urgent need for hard cash, he may sell his product at which may even be below the market price.

4) Perishable goods :

In case of perishable goods, the supplier would offer to sell more quantities at lower prices to avoid losses. For example, vegetables, eggs etc.

5) Rare goods :

The supply of rare goods cannot be increased or decreased according to its demand. Even if the price rises, supply remains unchanged. For example, rare paintings, old coins, antique goods etc