The document discusses the key factors that affect demand, including: 1. Price of the commodity - as price rises, demand falls and vice versa, due to income and substitution effects. 2. Price of related commodities like complements (rise in one raises demand for the other) and substitutes (fall in one raises demand for alternatives). 3. Income level - demand for normal goods rises with income while inferior goods see falling demand. It also outlines different types of demand like direct vs indirect, derived vs autonomous, and total market vs segment demand. Factors like population, tastes, and distribution of income additionally influence demand.

1. Demand
Factors Affecting Demand
Types of Demand
Prepared By:
Mohammed Jasir PV
Asst. Professor
MIIMS, Puthanangadi

2. • Desire to buy
• Ability to pay
• Willingness to pay

3. Demand
The concept ‘demand’ refers to “the quantity of a good or service that
consumers are willing and able to purchase at various prices during a given
period of time”.
Thus, effective demand for a thing depends on
(i) Desire to buy
(ii) Willingness to pay
(iii) Ability to pay

4. A. Price of the commodity
B. Price of related commodities
(I) Complementary Goods And
(II) Competing Goods Or Substitutes
C. Level of income of the household
D. Tastes and preferences of consumers
E. Other factors
i. Size of population
ii. Composition of population
iii. Distribution of income
Determinants of Demand or Factors Affecting Demand

5. Reason:-
• Income Effect
• Substitution effect
Price Demand
Price of the commodity
Price Demand

6. A. Price of the commodity
• It implies that a rise in price of a commodity brings a fall in its purchase
and vice-versa.
• This happens because of income and substitution effects.
• The substitution effect is the change in consumption patterns due to a
change in the relative prices of goods
• The income effect is the change in consumption patterns due to the
change in purchasing power

7. Price of related commodities
Complementary Goods

8. Competing Goods Or Substitutes

9. B. Price of related commodities
Related commodities are of two types :
 Complementary Goods
 Complementary goods are those goods which are consumed together
or simultaneously.
 When commodities are complements, a fall in the price of one (other
things being equal) will cause the demand of the other to rise
 Price of one product increase demand of another Product is decreasing

10.  Competing Goods Or Substitutes
– Competing goods or substitutes are those goods which can be used
with ease in place of one another.
– A fall in the price of one leads to a rise in the quantity demanded of its
substitutes.

11. 3. Level of income of the household
Income Demand of
Product
In Normal goods

12. Income
Demand of
Product
Inferior Commodities

13. C. Level of income of the household
• The demand for a commodity depends upon the money income of the household.
• In most cases, the larger the average money income of the household, the larger is
the quantity demanded of a particular good
INCOME DEMAND OF X

14. • However, there are certain commodities for which quantities demanded decrease
with an increase in money income. These goods are called inferior goods.
INCOME DEMAND

15. Tastes and preferences of consumers

17. D. Tastes and preferences of consumers
• The demand for a commodity also depends upon tastes and preferences of
consumers and changes in them over a period of time.
• Goods which are more in fashion command higher demand than goods which are
out of fashion.

18. Consumers may even discard a good even before it is fully utilized and prefer
another good which is in fashion.
For example,

19. Other factors
Size Of Population
Composition of population
Distribution of income

20. • Demand
• Determinants of Demand
– Price of the commodity
– Price of related commodities
( complementary and competing goods or substitutes )
– Level of income of the household
– Tastes and preferences of consumers
– Other factors
(Size of population, Composition of population, Distribution of income)

21. Types of Demand
• Direct and indirect demand
• Industry demand and firm demand
• Total market and market segment demand
• Derived demand and autonomous demand
• Demand for durable goods and non durable goods

22. Direct demand refers to demand for a commodity that is directly
consumed to satisfy human want. It’s called as consumers’ goods
demand.
e.g. Food Items, Readymade garments
A. Direct and indirect demand

23. Indirect demand: It is the demand for goods that are not used by
consumers directly. They are used by producers for producing other
goods.
Indirect demand is also known as producers’ goods demand.
e.g. Industrial Raw Material, Machine tools and Equipments

24. Cont..
• The demand from consumer is treated as direct demand; while it comes from
a manufacturer, it is indirect demand.
• Direct demand depends primarily upon the consumers income; whereas
indirect demand depends upon the concerned producers output.

25. b. Derived and Autonomous Demand
Derived Demand: The demand for resources are derived from the products they
produce
Derived demand occurs when there is a demand for a good or factor of
production resulting from demand for an intermediate good or service.
Eg.

26. Autonomous demand , is not derived or induced.
The demand for a product that is not associated with the
demand of other products is known as autonomous
Example: The demand for food, shelter, clothes, and vehicles
is autonomous as it arises due to biological, physical, and
other personal needs of consumers.

27. c. Demand For Durable & Non Durable Goods
Durable Goods: Machines, Tools Non-durable goods: Food, vegetables

28. d. Industry Demand and Firm Demand
Firm DD
INDUSTRIAL DD

29. e. Total Market And Market Segment Demand
Demand analysis requires not only the total demand for a product but also a break up
of the demand for the product in different parts of the market.
• Example: Demand for Baskin Robbins ice creams in India is Total market demand
• Baskin Robbins ice cream by women is a market segment demand.
Users of
In India
Users of
In EKM
Users of
In MIIMS
Total market DD Market Segment DD

30. Individual and Market demand
• Individual demand means quantity demanded
of a good by an individual consumer at various
prices per time period.
• Market demand is the aggregate of the
quantities demanded by all consumers in the
market at different prices per time period.

31. Thank You !!!