Question

State the factors which may affect market demand for a commodity.

Answer 1

Answer:

Explanation:

There are numerous factors which affect market demand for a commodity. The following are some of them mentioned below:

(1) Price of the commodity

It is the most vital factor which  determines the demand of a commodity. The price of the commodity and demand of the  quantity moves in an opposite direction. That means higher the price lower the demand and vise versa.

(2) Prices of Substitutes and Complementary Goods

The demand of a product is also affected by the prices of its substitutes or its complementary goods. For example a rise in price of petrol leads to a fall in demand of automobiles. Similarly when there is an increase in the price of scooters the demand for motor cycle increases which ultimately leads to an increase in the price of motor cycles.

(3) Population:

Higher the  population of region higher is the demand of various goods. The composition of the population too plays its part in the demand pof a particular item. For instance a higher female population in a particular region often lead to higher demand of items related to this gender.

(4) Taste, Habits and Preference :

The above three traits in humans plays an important factor in the demand of a particular commodity. A person is willing to give a higher price for a product which is in trend than for something which is out of fashion.

(5) Condition of Economic Activity:

The ongoing business conditions of the country plays an important part in the demand for a commodity. Like when a country is experiencing an inflationary period, the purchasing power of the people increases due to high circulation of money.

This leads to higher prices because of high demand. The opposite works during deflation.

(6) Income:

Higher disposal of income in the hands of the consumers leads to overall increase in consumption . The consumers buy more at the current price or at the same price. and at times even switch over to luxurious goods instead of  necessary goods . It works the other way around with decrease in income .

(7) Government Policy:

The economic policy followed by the government also impacts  the demand for commodities. The price of the commodities increases if various taxes are imposed on the commodities, which eventually leads to a fall in their demand .

Hope this helps.