Demand and its determinants project class 12 CBSE conclusion
Answers
Demand
Its the willingness and ability of a consumer to buy a good or a service.
Determinants of Demand:
These are divided into 2 approaches, individual demand function and market demand function.
INDIVIDUAL DEMAND FUNCTION
This refers to those determinants of demand, basically those factors which affect the demand of an individual.
1-Price of the commodity matter: If the price rises the Quantity Demanded( QD) will fall and vice versa effect if the price falls the Quantity demanded will rise.
-If price rises and real income falls, then the demand will also fall.
- If price falls and real income falls then the demand will rise.
This is so because the real income is related to purchasing power of the consumer, i.e the individual.
2- price of related good matters:
this includes two types, complementary goods and substitute goods.
complementary- these are goods like petrol and cars. so if demand of cars rise the demand of petrol also rises.
substitute- this is more choice in market. If price of coke falls, people will switch from pepsi to coke.
3- Income of the consumer
If his real income rises his demand will rise, if his real income falls, his demand will fall. Why? depending on what the product is. Needs dont rise, but luxuries and wants, their demand rises.
This is also related to normal good and inferior good.
4- Preferences (trend and fashion, choice of consumer)
5- expectations of the consumer from the market