Question

determinant of demand are the important factor which influnces the decision of consumers to purchase commodity or a service with respect to the above statment discuss any 5 determinants of the individual demand

Answer 1

Determinant of demand are the important factor which influences the decision of consumers to purchase commodity or a service with respect to the above statement, 5 determinants of the individual demand can be discussed as follows:

Explanation: Individual Demand  refers to the different quantities of a commodity that a consumer in the market is ready to buy at the different possible prices of the same commodity.

Determinants:

Qx = f(Px, Pr, T, E, Y)

where

Qx = Individual Demand

Px = Price of same commodity

Pr = Price of Related goods

T = Taste and Preference

E = Future Expectation

Y = Income of the consumer

• Price of same commodity: There is an inverse relationship between price and the individual demand of a commodity. With increase in price, quantity demanded contracts and vice versa.
• Price of Related goods: Related goods are of two types: Substitute and Complementary goods.

1. Substitute Goods: These are those goods which replace each other. Example: Tea and Coffee. There is a positive relationship between price and individual demand in case of such goods.
2. Complementary Goods: These are those goods which complete the demand of each other. Example: Pen and Ink. There is a negative relationship between price and individual demand in case of such goods.

• Taste and Preference: If a consumer is habitual of some commodity, there will be more demand as compared to the commodity for which there is no taste and preference.
• Future Expectation: If a consumer expects an increase in price in near future, then there will be more individual demand at present and vice versa.
• Income: With an increase in the income of a consumer, there will be more demand for normal goods but less in case of inferior goods.

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