Demand is the number of goods that a customer is ready and able to buy at several prices during a given time frame. Demand for goods or services decreases or increases due to several factors. Preferences, prices, and other substitute products are a few factors that affect the demand curve of a product. Today we will discuss the five major factors affecting demand curve mostly.
- Price of a commodity- This is the first and the most important factor affecting the demand for a product. This relation between the price and quantity of a product have an inverse relationship. Which means that when price increases, demand falls, this is because the customer’s satisfaction level is decreased. For instance, If the price of a juice increases, its demand will fall because the satisfaction obtained from that juice will decrease due to the rise in its price.
- Price of related Goods- A product
demand is also affected by the change in prices of the substitute or related
goods. These related goods are differentiated into two types:
- Substitute Goods- These goods can replace one another for a particular satisfaction, for example, tea and coffee. A certain increase in the rate of a substitute product can lead to an increase in demand for another product and vice-versa.
- Complementary Goods- These goods are used jointly to satisfy a distinct want, like tea and sugar.
- Income of the Consumer- Thedemand for a product also affected by a consumers income. However, this effect also depends on the quality and type of product under consideration.
- Taste and Preferences- This factor of a consumer directly impacts the demand for a product. This includes variations and change in customs, varieties, fashion, etc.
- Future price change- If the price of a particular product is assumed to increase in the future, then the demand for that product increases because the customers will buy more of that product. This expectation of price change in future changes the demand for a product at present.
The above-mentioned points directly or indirectly influence and affect the demand for a product. For a better understanding of each concept in Commerce subjects please stay tuned to BYJU’s