Explain the factors affecting market demand.
Explain the factors affecting market demand.
A market demand is the aggregate of the quantities demanded by all the consumers in the market at different prices, per time period.
Following are the factors that affect market demand for a commodity:
(i) Price of the commodity: Generally, when the price of a commodity goes up, quantity demanded falls and when price falls, quantity demanded goes up. (all other factors constant)
(ii) Income of the consumers: Generally when the income of consumers goes up, the demand for a normal commodity also goes up and when income falls, demand also falls. For an inferior good, when the income rises, the quantity demanded falls.
(iii) Price of related goods (i.e., of substitute goods and complementary goods): In case of complementary goods, like car and petrol, the demand for a commodity rises with a fall in the price of complementary goods. In case of substitute goods, like tea and coffee, demand for a commodity falls with a fall in the price of other substitute goods.
(iv) A change in tastes: Any change in consumers' tastes in favour of the commodity will lead to an increase in market demand and any unfavourable change in consumers' tastes will lead to decrease in market demand.
(v) Number of consumers in the market: More the consumers in the market and vice-versa, more will be the market demand for the commodities.
A market demand is the aggregate of the quantities demanded by all the consumers in the market at different prices, per time period.
Following are the factors that affect market demand for a commodity:
(i) Price of the commodity: Generally, when the price of a commodity goes up, quantity demanded falls and when price falls, quantity demanded goes up. (all other factors constant)
(ii) Income of the consumers: Generally when the income of consumers goes up, the demand for a normal commodity also goes up and when income falls, demand also falls. For an inferior good, when the income rises, the quantity demanded falls.
(iii) Price of related goods (i.e., of substitute goods and complementary goods): In case of complementary goods, like car and petrol, the demand for a commodity rises with a fall in the price of complementary goods. In case of substitute goods, like tea and coffee, demand for a commodity falls with a fall in the price of other substitute goods.
(iv) A change in tastes: Any change in consumers' tastes in favour of the commodity will lead to an increase in market demand and any unfavourable change in consumers' tastes will lead to decrease in market demand.
(v) Number of consumers in the market: More the consumers in the market and vice-versa, more will be the market demand for the commodities.
