explain the factors affecting demand in detail
according to 5 mark answer
Answers
Besides factors such as ticket prices, income per capita, economic climate, exchange rate, demographic factors also have significant role for aviation demand. The size or distribution of population is one of potential determinants of demand.
Answer:
Explanation:
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 the customer
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:
Substitute goods are those goods which can be used in place of one another for satisfaction of a particular want, like tea and coffee. An increase in the price of substitute leads to an increase in the demand for given commodity and vice-versa.
(ii) Complementary Goods:
Complementary goods are those goods which are used together to satisfy a particular want, like tea and sugar. An increase in the price of complementary good leads to a decrease in the demand for given commodity and vice-versa.
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.
i. If the given commodity is a normal good, then an increase in income leads to rise in its demand, while a decrease in income reduces the demand.
ii. If the given commodity is an inferior good, then an increase in income reduces the demand, while a decrease in income leads to rise in demand.
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.
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.