Define demand.Explain any four factors that affect demand for a commodity
Answers
Demand is the number of goods that the customers are ready and able to buy at several prices during a given time frame.
The various factors affecting demand for a Commodity :
1. Price of the Given Commodity :
It is the most important factor affecting demand for the given commodity. Generally, there exists an inverse relationship between price and quantity demanded. It means, as price increases, quantity demanded falls due to decrease in the satisfaction level of consumers.
2. Price of Related Goods :
Demand for the given commodity is also affected by change in prices of the related goods. Related goods are of two types:
(i) Substitute Goods.
(ii) Complementary Goods.
3. Income of the Consumer :
Demand for a commodity is also affected by income of the consumer. However, the effect of change in income on demand depends on the nature of the commodity under consideration.
4. Tastes and Preferences :
Tastes and preferences of the consumer directly influence the demand for a commodity. They include changes in fashion, customs, habits, etc. If a commodity is in fashion or is preferred by the consumers, then demand for such a commodity rises. On the other hand, demand for a commodity falls, if the consumers have no taste for that commodity.
5. Expectation of Change in the Price in Future :
If the price of a certain commodity is expected to increase in near future, then people will buy more of that commodity than what they normally buy. There exists a direct relationship between expectation of change in the prices in future and change in demand in the current period. For example, if the price of petrol is expected to rise in future, its present demand will increase.
Hope it helps....!!!
In economics, demand is the quantity of a good that consumers are willing and able to purchase at various prices during a given period of time.
Four factors that affect demand for a commodity are:
- Price of the commodity itself: When a commodity is selling at a very high price, only rich people are able to buy it. So the demand for that commodity will be less. But when the price is low more and more people will be able to buy it and the demand for the commodity would be more. Thus, the demand for the commodity is greatly influenced by its price.
- Prices of other related goods: The demand for a commodity is also influenced by the prices of other related goods as substitutes. Tea and coffee are substitutes for each other. A change in the prices of such commodities affects the changes in the consumption of its substitutes. For example, a change in the price of tea will change the consumption of coffee.
- Climate and weather: Cold countries have more demand for woolen clothes, heaters, etc. Whereas the demand in tropical countries for cotton textiles, umbrellas, raincoats, etc., is more. Even in the same country demand for umbrellas and raincoats will not be as high in the winter as during the rains. Thus, change in weather also influences the demand.
- Complementary Goods: Complementary goods are those goods that are used together to satisfy a particular want, like tea and sugar. An increase in the price of complementary goods leads to a decrease in the demand for a given commodity and vice-versa. For example, if the price of a complementary good (say, sugar) increases, then demand given commodity (say, tea) will fall as it will be relatively costlier to use both the goods together. So, demand for a given commodity is inversely affected by a change in the price of complementary goods.
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