In this note, we are going to discuss some Determinants of Demand in Economics or Factors of Demand. Welcome to Poly Notes Hub, a leading destination for Diploma Engineering Notes Syllabus-Wise in PDF format.
Author Name: Arun Paul.
Different types of Determinants of Demand
There are several types of factors of demand, but some of the most significant include –
1. Price of the Product
Demand for a product varies in response to changes in its price. Generally, when the price rises, demand decreases, and vice versa. However, this relationship holds true only if other factors remain constant.
2. Consumer Income
The demand for goods and services tends to increase as consumer income rises. Conversely, when income decreases, demand typically falls.
3. Prices of Related Goods and Services
The demand for a product can be influenced by changes in the prices of related goods and services. Complementary products exhibit an inverse relationship: if the price of one increases, demand for its complementary product decreases (e.g., increase in bread prices decreases butter demand). On the other hand, substitute products show a direct relationship: an increase in the price of one product leads to an increase in demand for its substitute (e.g., increase in tea price increases demand for coffee).
4. Consumer Expectations
Consumer expectations regarding future income or changes in product prices can impact current demand. High expectations of future income or price increases tend to raise demand, while low expectations have the opposite effect.
5. Number of Buyers in the Market
Changes in the number of buyers for a particular product can lead to shifts in demand. More buyers generally result in increased demand, while fewer buyers typically lead to decreased demand.