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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