Exceptions/ Limitations of the law of substitution:
- Utility can’t be measured in numbers:
Utility can’t be measured in terms of numbers. It can only be expressed in terms of range i.e. high or low.
- Ignorance of consumers:
If the consumer is ignorant about the availability of substitute goods in market then he can’t substitute the commodity having high M.U instead of low.
- Frequent change in price:
This law assumes that price of commodity remains constant. Generally utility is judged on the price. If the price changes then there is not application on the law of diminishing M.U. At that time we can’t measure M.U of different commodity properly.
- Influence of custom and fashion:
In the case of commodity related to custom and fashion this law is not applicable because while purchasing such commodity they don’t care about equalizing M.U from different commodity.
- M.U of money doesn’t remains constant:
This law assumes that M.U of money is constant but in reality M.U of money is changeable on the basis of amount of money with people.
- Individual goods:
In the case of individual this law is not applicable because such goods like T.V, motorcycle, fridge, etc are purchased once at a time. As a result there is not the possibility of comparison of M.U of such goods among each other.
- Shortage of goods:
If there is shortage of goods in market there is no any question to equalize the M.U from several commodities.
This law is not applicable for addict because druggist, drunkard, etc are not ready to sacrifice any single drop of drug or alcohol for other commodity.