Respuesta :
7 Factors which Determine the Demand for Goods
Tastes and Preferences of the Consumers
Incomes of the People
Changes in the Prices of the Related Good
The Number of Consumers in the Market
Changes in Propensity to Consume
Consumers' Expectations with regard to Future Prices
Income Distribution
Demand schedule and law of demand state the relationship between price and quantity demanded by assuming “other things remaining the same “. When there is a change in these other things, the whole demand schedule or demand curve undergoes a change.
1. Tastes and Preferences of the Consumers:
An important factor which determines demand for a good is the tastes and preferences of the consumers for it. A good for which consumers’ tastes and preferences are greater, its demand would be large and its demand curve will lie at a higher level and vice versa.
2. Incomes of the People:
The demand for goods also depends upon incomes of the people. The greater the incomes of the people the greater will be their demand for goods. In drawing a demand schedule or a demand curve for a good we take incomes of the people as given and constant. When as a result of the rise in incomes 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 the 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 the goods and as a result the demand curve will shift below.
3. Changes in the 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 a demand schedule or a 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 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.
4. The Number of Consumers in the Market:
The market demand for a good is obtained by adding up the individual demands of the present as well as prospective consumers or buyers of a good at various possible prices. The greater the number of consumers of a good, the greater the market demand for it and vice versa.
5. Changes in Propensity to Consume:
People’s propensity to consume also affects the demand for them. The income of the people remaining constant, if their propensity to consume rises, then out of the given income they would spend a greater part of it with the result that the demand for goods will increase. On the other hand, if propensity to save of the people increases, that is, if propensity to consume declines, then the consumers would spend a smaller part of their income on goods with the result that the demand for goods will decrease.
People’s propensity to consume also affects the demand for them. The income of the people remaining constant, if their propensity to consume rises, then out of the given income they would spend a greater part of it with the result that the demand for goods will increase.
On the other hand, if propensity to save of the people increases, that is, if propensity to consume declines, then the consumers would spend a smaller part of their income on goods with the result that the demand for goods will decrease.
6. Consumers’ Expectations with regard to Future Prices:
Another factor which influences the demand for goods is consumers’ expectations with regard to future prices of the goods. If due to some reason, consumers expect that in the near future prices of the goods would rise, then in the present they would demand greater quantities of the goods so that in the future they should not have to pay higher prices. Similarly, when the consumers hope that in the future they will have good income, then in the present they will spend greater part of their incomes with the result that their present demand for goods will increase.
7. Income Distribution:
Distribution of income in a society also affects the demand for goods. If distribution of income is more equal, then the propensity to consume of the society as a whole will be relatively high which means greater demand for goods. On the other hand, if distribution of income is more unequal, then propensity to consume of the society will be relatively less, for the propensity to consume of the rich people is less than that of the poor people.
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