What Factors Cause A Change In Demand

vi Important Factors That Influence the Need of Goods

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The demand changes as a consequence of changes in price, other factors determining it being held constant. We shall explain beneath in particular how these other factors decide market demand for a commodity.

These other factors determine the position or level of need curve of a commodity.

Information technology may be noted that when there is a change in these non-cost factors, the whole curve shifts rightward or leftward every bit the case may be. The post-obit factors determine marketplace demand for a commodity.

1. Tastes and Preferences of the Consumers:

An important factor which determines the need for a good is the tastes and preferences of the consumers for it. A good for which consumers' tastes and preferences are greater, its demand would exist big and its demand curve volition therefore lie at a higher level. People's tastes and preferences for various goods often change and as a result in that location is modify in demand for them.

The changes in demand for various goods occur due to the changes in fashion and also due to the pressure of advertisements by the manufacturers and sellers of different products. On the contrary, when certain goods go out of fashion or people's tastes and preferences no longer remain favourable to them, the demand for them decreases.

2. Income of the People:

The demand for goods as well depends upon the incomes of the people. The greater the incomes of the people, the greater will be their demand for goods. In drawing the demand schedule or the demand curve for a good we accept income of the people as given and constant. When every bit a issue of the rise in the income of the people, the need increases, the whole of the demand bend shifts upward and vice versa.

The greater income means the greater purchasing power. Therefore, when incomes of the people increase, they can beget to purchase more. It is considering of this reason that increase in income has a positive effect on the demand for a expert.

When the incomes of the people autumn, they would demand less of a skillful and every bit a result the need curve will shift downward. For instance, as a result of economical growth in Bharat the incomes of the people accept greatly increased owing to the big investment expenditure on the development schemes by the Government and the private sector.

As a result of this increase in incomes, the demand for good grains and other consumer goods has profoundly increased. Likewise, when because of drought in a twelvemonth the agriculture production greatly falls, the incomes of the farmers decline. Equally a event of the decline in incomes of the farmers, they volition need less of the cotton cloth and other manufactured products.

3. Changes in Prices of the Related Goods:

The need for a adept is also affected by the prices of other goods, peculiarly those which are related to it equally substitutes or complements. When we describe the demand schedule or the demand curve for a skillful we accept the prices of the related appurtenances equally remaining constant.

Therefore, when the prices of the related goods, substitutes or complements, modify, the whole demand curve would change its position; it will shift upwardly or downward equally the example may be. When the toll of a substitute for a adept falls, the demand for that good will refuse and when the price of the substitute rises, the need for that good will increase.

For case, when price of tea and incomes of the people remain the same merely the price of coffee falls, the consumers would need less of tea than before. Tea and coffee are very close substitutes. Therefore, when java becomes cheaper, the consumers substitute coffee for tea and equally a result the demand for tea declines. The goods which are complementary with each other, the fall in the cost of whatever of them would favorably impact the demand for the other.

For instance, if price of milk falls, the demand for sugar would besides be favorably afflicted. When people would have more milk, the demand for sugar will also increase. Likewise, when the price of cars falls, the quantity demanded of them would increment which in plow will increase the need for petrol.

4. Advertisement Expenditure:

Advertisement expenditure made past a firm to promote the sales of its product is an important factor determining need for a product, specially of the product of the house which gives advertisements. The purpose of advertisement is to influence the consumers in favour of a production. Advertisements are given in diverse media such as newspapers, radio, and television. Advertisements for goods are repeated several times and so that consumers are convinced about their superior quality. When advertisements prove successful they crusade an increase in the need for the product.

5. The Number of Consumers in the Marketplace:

The marketdemandfor a proficient is obtained past calculation up the individual demands of the present also as prospective consumers of a good at various possible prices. The greater the number of consumers of a expert, the greater the market need for information technology.

Now, the question arises on what factors the number of consumers for a practiced depends. If the consumers substitute 1 adept for another, then the number of consumers for the skillful which has been substituted past the other volition decline and for the good which has been used in place of the others, the number of consumers will increase.

Besides, when the seller of a good succeeds in finding out new markets for his skillful and every bit a result the marketplace for his proficient expands the number of consumers for that skilful will increase. Another of import cause for the increment in the number of consumers is the growth in population. For instance, in India the need for many essential appurtenances, especially nutrient grains, has increased considering of the increase in the population of the state and the resultant increment in the number of consumers for them.

6. Consumers' Expectations with Regard to Future Prices:

Another factor which influences the demand for appurtenances is consumers' expectations with regard to future prices of the goods. If due to some reason, consumers expect that in the about time to come prices of the goods would rising, then in the nowadays they would demand greater quantities of the goods so that in the time to come they should not have to pay higher prices. Similarly, when the consumers wait that in the future the prices of goods will fall, then in the present they will postpone a role of the consumption of goods with the issue that their nowadays demand for goods volition decrease.

Increase in Demand and Shifts in Demand Curve :

When demand changes due to the factors other than price, in that location is a shift in the whole demand curve. Every bit mentioned to a higher place, apart from toll, demand for a commodity is determined past incomes of the consumers, his tastes and preferences, prices of related goods. Thus, when at that place is any change in these factors, it volition cause a shift in demand bend.

For example, if incomes of the consumers increase, say due to the hike in their wages and salaries or due to the grant of dearness allowance, they will need more of a good, say cloth, at each price. This will cause a shift in the demand curve to the right. Similarly, if preferences of the people for a commodity, say colour Boob tube, become greater, their demand for colour Tv set will increment, that is, the demand curve will shift to the right and, therefore, at each price they will demand more colour TV.

The other of import factor which tin crusade an increase in demand for a commodity is the expectations almost future prices. If people await that price of a commodity is probable to go up in hereafter, they will try to purchase the commodity, specially a durable one, in the current menses which volition boost the current demand for the goods and cause a shift in the demand bend to the right.

As seen in a higher place, the prices of related commodities such every bit substitutes and complements can also change the need for a commodity. For example, if the toll of coffee rises other factors remaining the constant, this will cause the demand for tea, a substitute for coffee, to increment and its demand curve to shift to the correct.

Subtract in Demand and Shift in the Demand Curve :

If in that location are adverse changes in the factors influencing demand, it volition lead to the decrease in demand causing a shift in the demand curve. For example, if due to inadequate rainfall agricultural output in a yr declines this will cause a fall in the incomes of the farmers. This fall incomes of the farmers will cause a decrease in the need for industrial products, say textile, and will result in a shift in the demand bend to the left.

Similarly, modify in preferences for bolt can also touch the need. For example, when color TVs came to India people's greater preference for them led to the increment in their demand. Just this brought about decrease in demand for black and white TVs causing leftward shift in need curve for these black and white TVs.

The decrease in demand does non occur due to the rise in cost but due to the changes in other determinants of demand. Decrease in demand for a commodity may occur due to the fall in the prices of its substitutes, ascent in the prices of complements of that commodity and if the people expect that toll of a adept will fall in futurity.