A discussion on the factors that influence demand

Some of the major factors affecting the demand in microeconomic: Demand for a commodity increases or decreases due to a number of factors. The various factors affecting demand are discussed below: Price of the Given Commodity:

A discussion on the factors that influence demand

The demand changes as a result of changes in price, other factors determining it being held constant. We shall explain below in detail how these other factors determine market demand for a commodity. These other factors determine the position or level of demand curve of a commodity.

It may be noted that when there is a change in these non-price factors, the whole curve shifts rightward or leftward as the case may be. The following factors determine market demand for a commodity.

Tastes and Preferences of the Consumers: An important factor which determines the demand for a good is the tastes and preferences of the consumers for it. The changes in demand for various goods occur due to the changes in fashion and also due to the pressure of advertisements by the manufacturers and sellers of different products.

Income of the People: The demand for goods also depends upon the incomes of the people. The greater the incomes of the people, the greater will be their demand for goods.

In drawing the demand schedule or the demand curve for a good we take income of the people as given and constant. When as a result of the rise in the income of the people, the demand increases, the whole of the demand curve shifts upward and vice versa. The greater income means the greater purchasing power.

Therefore, when incomes of the people increase, they can afford to buy more. It is because of this reason that increase in income has a positive effect on the demand for a good. When the incomes of the people fall, they would demand less of a good and as a result the demand curve will shift downward.

For instance, as a result of economic growth in India the incomes of the people have greatly increased owing to the large investment expenditure on the development schemes by the Government and the private sector.

As a result of this increase in incomes, the demand for good grains and other consumer goods has greatly increased.

Likewise, when because of drought in a year the agriculture production greatly falls, the incomes of the farmers decline. As a result of the decline in incomes of the farmers, they will demand less of the cotton cloth and other manufactured products.

Changes in Prices of the Related Goods: The demand for a good is also affected by the prices of other goods, especially those which are related to it as substitutes or complements. When we draw the demand schedule or the demand curve for a good we take the prices of the related goods as remaining constant.

Therefore, when the prices of the related goods, substitutes or complements, change, the whole demand curve would change its position; it will shift upward or downward as the case may be. When the price of a substitute for a good falls, the demand for that good will decline and when the price of the substitute rises, the demand for that good will increase.

6 Important Factors That Influence the Demand of Goods

For example, when price of tea and incomes of the people remain the same but the price of coffee falls, the consumers would demand less of tea than before. Tea and coffee are very close substitutes.

Therefore, when coffee becomes cheaper, the consumers substitute coffee for tea and as a result the demand for tea declines. The goods which are complementary with each other, the fall in the price of any of them would favorably affect the demand for the other.

For instance, if price of milk falls, the demand for sugar would also be favorably affected. When people would take more milk, the demand for sugar will also increase. Likewise, when the price of cars falls, the quantity demanded of them would increase which in turn will increase the demand for petrol.

Advertisement expenditure made by a firm to promote the sales of its product is an important factor determining demand for a product, especially of the product of the firm which gives advertisements. The purpose of advertisement is to influence the consumers in favour of a product.

Advertisements are given in various media such as newspapers, radio, and television. Advertisements for goods are repeated several times so that consumers are convinced about their superior quality. When advertisements prove successful they cause an increase in the demand for the product. The Number of Consumers in the Market: The marketdemandfor a good is obtained by adding up the individual demands of the present as well as prospective consumers of a good at various possible prices.

The greater the number of consumers of a good, the greater the market demand for it. Now, the question arises on what factors the number of consumers for a good depends.Demand elasticity is the sensitivity of the demand for a good or service due to a change in another factor.

There are many factors that influence a change in demand elasticity.

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Article shared by. There are several factors which influence the quantity demanded of a alphabetnyc.comant among them are the price of the commodity, the price of related commodities, and income of the consumer, taste and preference of consumers, size of population and various other factors.

Factors affecting demand The individual demand curve illustrates the price people are willing to pay for a particular quantity of a good.

A discussion on the factors that influence demand

The market demand curve will be the sum of all individual demand . What other factors not mentioned in the article might also influence the price elasticity of demand for cigarettes? According to the above discussion, the factor influence the price elasticity demand for cigarettes is income level.

The demand changes as a result of changes in price, other factors determining it being held constant.

Income Level

We shall explain below in detail how these other factors determine market demand for a commodity. These other factors determine the position or level of demand curve of a commodity.

When examining demand factors, especially for businesses, it is important to realize that there is a relationship between Individual And Market Demand.. These two, though slightly different, share the same causes and are impacted by macro and micro economic variables in the same way, but not the same magnitude.

9 Factors That Influence Price Elasticity of Demand