Define Demand and explain factors affecting demand ?
Answer in detail
Answers
Answer:
We defined demand as the amount of some product that a consumer is willing and able to purchase at each price. This suggests at least two factors, in addition to price, that affect demand. “Willingness to purchase” suggests a desire to buy, and it depends on what economists call tastes and preferences.
Explanation:
hope its helpful for you
Answer:
The demand for a good depends on several factors, such as price of the good, perceived quality, advertising, income, confidence of consumers and changes in taste and fashion.
We can look at either an individual demand curve or the total demand in the economy.
The individual demand curve illustrates the price people are willing to pay for a particular quantity of a good.
The market demand curve will be the sum of all individual demand curves. It shows the quantity of a good consumers plan to buy at different prices.
1. Change in price
A change in price causes a movement along the Demand Curve.
How important is price?
Some goods are more affected by price than others.
If petrol increases in price, because it is a necessity, there is only a small fall in demand (we say it is inelastic demand).
If Volvic water increases in price, there will be a significant fall in demand because people buy cheaper substitutes (demand is elastic)
Shifts in the demand curve
This occurs when, even at the same price, consumers are willing to buy a higher (or lower) quantity of goods. This will occur if there is a shift in the conditions of demand.
Factors which can shift the demand curve
A shift to the right in the demand curve can occur for a number of reasons:
Income. An increase in disposable income enabling consumers to be able to afford more goods. Higher income could occur for a variety of reasons, such as higher wages and lower taxes.
Credit facilities. If it is easier and cheaper to borrow, this may encourage consumers to buy expensive items on credit, for example, cars and foreign holidays.
Quality. An increase in the quality of the good e.g. better quality digital cameras encourages people to buy one.
Advertising can increase brand loyalty to goods and increase demand. For example, higher spending on advertising by Coca Cola has increased global sales.
Substitutes. An increase in the price of substitutes, e.g. if the price of Samsung mobile phones increases, this will increase the demand for Apple iPhones – a major substitute for the Samsung.
Complements. A fall in the price of complements will increase demand. E.g. a lower price of Play Station 2 will increase the demand for compatible Play Station games.
Weather: In cold weather, there will be increased demand for fuel and warm weather clothes.
Expectations of future price increases. A commodity like gold may be bought due to speculative reasons; if you think it might go up in the future, you will buy now.