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demand
- 2. In economics,demand is the utility for a goods or service of an economic agent, relative to his/her income. Determinants of demand deals with the factors by which demand of a product can varies.
- 3. Market price Consumer income Priceof related goods Taste Government policy Climatic conditions Advertisements Expectations Number of consumers Graphs
- 4. Price is themost important determinant of demand. A Demand curve plots combination of prices and quantity demanded. A shift in price causes a shift along the demand curve A change in price cause a shift along the demand curve. A shift along the demand curve is referred to as a shift in quantity demanded.
- 5. A shift inany other variable except price causes a shift in the entire demand curve. A shift in the entire demand curve is referred to as a shift in demand.
- 6. Change in incomecan increase or decrease demand. A good whose demand decrease with an increase in income is called an “inferior good”. A good whose demand increase with an increase in income is called a “normal good”.
- 7. An increasein income will reduce the demand for ramen noodles or generic products. An increase in income will increase the demand for cars or clothing. An increase in income will significantly increase the demand for air travel or jewelry.
- 8. Changes in theprices of other goods can increase or decrease demand A good that causes an increase in the demand for another good when its price increase is called a “substitute good”. A good that causes a decrease in the demand for another good when its price increases is called a “complementary good”.
- 9. An increase inthe price of peanut butter will reduce the demand of jelly .peanut butter and jelly are complements. An increase in the price of Pepsi will increase the demand for coke .Pepsi and coke are substitutes
- 10. Demand curve canshift due to change in taste over time. For example:- demand for cereals for cereals may be high in the morning but low at night.
- 11. It refers toone of the major factor that affect the demand for a product. For example, if a product has high tax rate, this would increase the price of the product. This would result in decrease in demand for that product. Similarly, the credit policies of a country also induce the demand for a product .for example, if sufficient amount of credit is available to consumers, this would increase the demand for products
- 12. Affect the demandof a product to a greater extent. For example, the demand of ice-cream and cold drinks increases in summer, while tea and coffee and preferred in winter. Some products have a stronger demand in hilly areas than in plains. Therefore, individuals demand different products in different climatic conditions.
- 13. Refers to oneof the important factors of determining the demand for a product. Effective advertisement are helpful in many ways, such as catching the attention of consumers, informing them about the availability of a product, demonstrating the feature of the product to potential consumers, and persuading them to purchase the product. Consumers are highly sensitive about advertisement as sometimes they get attached to advertisement as sometimes they get attached to advertisement endorsed by their favorite celebrities. This result in increase in demand in the product.
- 14. Ostentatious consumption Some goodsare luxurious items where satisfaction comes from knowing both the price of the good and being able to flaunt consumption of it to other people.
- 15. An increase inthe number of potential buyer will increase the demand for the good. For example:-the demand for land increases as the population increases. Similarly baseball tickets are generally more expensive in larger cities.
- 18.