March 05, 2019

Determinants Of Demand

The major factors influencing demand or the determinants of demand can be described as follows:

1. Commodity Price

Price of the commodity is the main factor that influences the quantity of demand. If price increases then the demand of that commodity decreases and vice versa.

2. Income Of The Consumer

Income is another notable determinant of demand. If income rises, then consumers buy more products and if the income of people decreases then the demand for the product decreases.

3. Price Of Substitutes

If the price of substitutes or complementary goods increases, then the demand for another related good will increase and vice versa.
determinants of demand
4. Tastes And Preference

Tastes and preferences is another determinant that affects demand. Consumers are attracted towards the new taste because of change in lifestyle, fashion, customs etc. Increase in tastes and preferences leads to increase in demand.

5. Number Of Consumers

Demand is affected by the numbers of buyers in the market. Large number of customers means more demand and vice versa.

6. Advertisement

Producers advertise their products to attract more consumers. Therefore, advertisement helps to increase the demand of the products and services.

     
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7. Future Expectations

Future expectations of buyers also influence demand. Expectation of rise in price in near future increases demand and expectation of fall in price leads to decrease in demand at present.

8. Tax Policy

Country's tax policy  is another determinant of quantity of demand. If rate of tax increases, the quantity of demand decreases and vice versa.