What are the determinants of :
(i) Increase in demand for a commodity?
(ii) Decrease in demand for a commodity?
Answers
The major determinants of consumer demand in the market for any commodity includes consumer income,prices of related goods and services(substitute or complement),consumer tastes and preferences,expectations about future commodity price which can individually or collectively cause an increase or decrease in overall consumer demand of any commodity in the market.
Explanation:
In the first case,suppose that the consumer income increases or the prices of any substitute commodity increases.As a reaction to these economic fluctuations,the consumer demand for any commodity will increase since the consumer now has higher income to spend on various commodities or products or an increase in price of substitute goods would decrease its consumer demand and consequently,increase the market demand for the commodity in concern.Now,if the consumer taste and preference for the commodity increases,its consumer demand would understandably increase or consumer expectation of higher price in future would also lead to a higher consumer demand for the commodity at present.
In the second case,decrease in consumer income or a decrease in the price of substitute good would lead to a decrease in the consumer demand of the commodity.Additionally,consumer taste or preference towards any other product or away from the concerned commodity or consumer expectation of a lower commodity price in the future can also reduce the consumer demand for the concerned commodity at present.
Answer:
The major determinants of consumer demand in the market for any commodity includes consumer income,prices of related goods and services(substitute or complement),consumer tastes and preferences,expectations about future commodity price which can individually or collectively cause an increase or decrease in overall consumer demand of any commodity in the market.
Explanation:
In the first case,suppose that the consumer income increases or the prices of any substitute commodity increases.As a reaction to these economic fluctuations,the consumer demand for any commodity will increase since the consumer now has higher income to spend on various commodities or products or an increase in price of substitute goods would decrease its consumer demand and consequently,increase the market demand for the commodity in concern.Now,if the consumer taste and preference for the commodity increases,its consumer demand would understandably increase or consumer expectation of higher price in future would also lead to a higher consumer demand for the commodity at present.
In the second case,decrease in consumer income or a decrease in the price of substitute good would lead to a decrease in the consumer demand of the commodity.Additionally,consumer taste or preference towards any other product or away from the concerned commodity or consumer expectation of a lower commodity price in the future can also reduce the consumer demand for the concerned commodity at present.
Explanation: