Explain the determinants demands


Determinants of Demand are as follows:

(a) Product cost: Demand of the product changes as per the change in the price of the commodity. People deciding to buy a product remain constant only if all the factors related to it remain unchanged. Demand and price of product have inverse relationship.

(b) The income of the consumers: There is direct relationship between income of consumers and demand of product. When the income increases, the number of goods demanded also increases. Likewise, if the income decreases, the demand also decreases.

(c) Costs of related goods and services: For a complimentary product, an increase in the cost of one commodity will decrease the demand for a complimentary product. Example: An increase in the rate of bread will decrease the demand for butter. Similarly, an increase in the rate of one commodity will generate the demand for a substitute product to increase. Example: Increase in the cost of tea will raise the demand for coffee and therefore, decrease the demand for tea.

(d) Consumer expectation: High expectation of income or expectation in the increase in price of a good also leads to an increase in demand. Similarly, low expectation of income or low pricing of goods will decrease the demand.


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