Causes of Abnormal Demand In WASSCE Economics

A typical demand curve slopes downwards from left to right, showing that the quantity of a commodity demanded increases as the price decreases and vice versa. However, there are instances when these laws of demand do not apply.  In such a rare instance, the quantity of a commodity demanded increases as the prices increase and vice versa. Such rare occasions are what is referred to as abnormal demand. The curve slopes upward from the left to the right.

For this article, I will only explain four causes of abnormal demand.

Future expectations are one of the causes of this kind of demand. People tend to demand more of a commodity when they foresee that the price of that commodity will rise more in the future. Share speculators at the stock exchange buy more shares even at higher prices if they expect a future rise in the prices of such shares when they resell them and make more profits. Factors that may make people expect a rise in prices include war, rumours of war, and political disturbances like coups, pandemics, etc.

Another cause is articles of ostentation. These commodities serve as status symbols or boost the ego of their users. They are valued more and demanded more at higher prices. Examples of goods that fall into these categories include jewelry, lace materials, gold watches, luxury cars, etc.

Read: Scale of preference and opportunity cost

Inferior Giffen goods have also been identified as a cause for unexpected demand. Because these are goods whose demand rises as their prices increase, their demand decreases with the increase in their consumers’ income. Sir Robert Giffen observed this scenario, and the term Giffen goods was derived. He observed that Irish peasants demanded for more inferior goods like potatoes at high prices than they demanded at low prices.  Low-income earners spend a greater portion of their income on such goods that they consider essential, irrespective of their prices.

The fourth one is rare commodities. People tend to buy more unique commodities, such as antique furniture, at higher prices. These commodities are challenging to come by as they are ascribed an element of uniqueness and high social value if their prices are high.

Bolarinwa Olajire

A tutor with a demonstrated history of working in the education industry. Skilled in analytical skills. Strong education professional with a M. SC focused in condensed matter. You can follow me on Twitter by clicking on the icon below to ask questions.

Leave a Reply

Your email address will not be published. Required fields are marked *

Back to top button