Introduction:
In economics demand means desire, need or a want of a consumer backed by his willingness and ability to pay.
Demand in Economics is the desire to possess something and the willingness and ability to pay a certain price in order to possess it.
Demand thus has four dimensions
Market – whose demand?
Price - at what price?
Time- at what period of time?
Quantity- How much?
Determinants of Demand:
1. The price of commodity X:
Demand is primarily influenced by price. At higher price less of the commodity demanded and at lower price, more.
2. The price of substitutes of X:
The consumer wanting to buy X, also checks and compares the price of a substitute of X and then takes decision to buy.
3. Income of the consumer:
The disposable income of a consumer has a direct influence on demand for X that
consumer wants to buy.
4. Utility of the commodity:
Demand for a commodity arises because of its utility to consumer.
5. Quality of the commodity:
Better the quality of the good, more of it will be demanded by the consumer.
6. The taste and Fashion:
The taste of a consumer for a particular commodity influences the extent of demand. He will buy more of what he prefers.
7. Size of population: Demand depends on the number of buyers.
8. Expectations about future prices:
Consumers’ expectations of prices that may prevail in the near future have effect on demand.
In economics demand means desire, need or a want of a consumer backed by his willingness and ability to pay.
Demand in Economics is the desire to possess something and the willingness and ability to pay a certain price in order to possess it.
Demand thus has four dimensions
Market – whose demand?
Price - at what price?
Time- at what period of time?
Quantity- How much?
Determinants of Demand:
1. The price of commodity X:
Demand is primarily influenced by price. At higher price less of the commodity demanded and at lower price, more.
2. The price of substitutes of X:
The consumer wanting to buy X, also checks and compares the price of a substitute of X and then takes decision to buy.
3. Income of the consumer:
The disposable income of a consumer has a direct influence on demand for X that
consumer wants to buy.
4. Utility of the commodity:
Demand for a commodity arises because of its utility to consumer.
5. Quality of the commodity:
Better the quality of the good, more of it will be demanded by the consumer.
6. The taste and Fashion:
The taste of a consumer for a particular commodity influences the extent of demand. He will buy more of what he prefers.
7. Size of population: Demand depends on the number of buyers.
8. Expectations about future prices:
Consumers’ expectations of prices that may prevail in the near future have effect on demand.
9. Climatic conditions: Climatic changes affect demand.
10. Psychology of the consumers:
There is a possibility that as more and more consumers possess a particular good, others are psychologically activated to buy it. This is known as a ‘Bandwagon’ effect.
On the other hand consumers want to possess a good which is not commonly demanded by others. This is known as ‘Snob’ effect.
11. Advertisements and salesmanship:
In modern market demand for a product is created through appropriate
advertisements and sales promotion.
10. Psychology of the consumers:
There is a possibility that as more and more consumers possess a particular good, others are psychologically activated to buy it. This is known as a ‘Bandwagon’ effect.
On the other hand consumers want to possess a good which is not commonly demanded by others. This is known as ‘Snob’ effect.
11. Advertisements and salesmanship:
In modern market demand for a product is created through appropriate
advertisements and sales promotion.
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