BBA BBA-BI BBA-TT BCIS First Semester Introductory Economics Introductory Microeconomics Introductory Microeconomics Introductory Microeconomics SECOND SEMESTER SECOND SEMESTER

Demand ,Determinants of Demand


The quantity of goods and services that consumer are willing and able to purchase in the market at various prices during a period of time is called demand.

Determinants of Demand(Factors affecting demand):

The various factors that affects demand of a commmodity are as follows:

a. Price of a commodity:

This is the main determinant of market demand.When price of a commodity increases ,demand for a commodity decreases and vice-versa.There is the indirect relationship between price and quantity.

b. Income:

A rise in a person’s income will lead to an increase in demand (shift demand curve to the right), a fall will lead to a decrease in demand for normal goods. Goods whose demand varies inversely with income are called inferior goods (e.g. Hamburger Helper).

c. Number of Consumers:

When the no. of consumer (population of a country ) increases then the demand for a commodity also increases and vice -versa.

d. Price of related goods:

It consists of two goods :

i.Substitute goods (those that can be used to replace each other): price of substitute and demand for the other good are directly related.

Example: If the price of coffee rises, the demand for tea should increase.

ii. Complement goods (those that can be used together): price of complement and demand for the other good are inversely related.

Example:An incresase in price of a petrol causes a decrease in the demand for car ,othe things remaining the same.

e.Taste and preferences:

This is also major determinants of demand.When the taste and preferences of people is matcched with the commodity then the quantity demanded also increases and vice-versa.There exists direct relationship between them.

f. Feast and festivals:

When the festivals come ,then the quantity of goods demanded also increases and vice-versa.So,there exists direct relationship between festivals and quantity of goods demanded.

g. Climate:

With the change in the climate ,the quantity of goods  demanded also increases .So there exists direct relationship between climate and quantity of goods demanded.

h. Advertisement expenditure:

When the money invested in advertisement is more ie;the more the advertisement will be shown, that  will lead to more no. of quantity demanded.So,there exists direct relationship between price and quantity.

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