This document discusses factors that affect demand and supply. It defines demand as the desire to have a commodity or service backed by purchasing power. Factors that increase demand include rising income, lower prices of related goods, expectations of future rises in income or prices, preferences shifting towards a good, and larger population or number of buyers. Supply is defined as quantities producers are willing to sell at different prices. Factors that increase supply include lower production costs, new technologies, higher prices of related goods if they are substitutes, and expectations of future price rises. The number of sellers also increases supply.

1. Factors Affecting
Demand and Supply
By: Jaya Singh
Master of Library and Information Sciences
1st Semester
Enrollment No: 302/17
Session: 2018-19
Babasaheb Bhimrao Ambedkar University
Lucknow

2. Demand
• The basic concept underlying the demand for any
commodity is human needs. These human needs when
shaped by a person's culture and individuality take the
form of wants. People have almost unlimited wants but
limited resources. They therefore choose those products
that produce maximum satisfaction for their money. Their
wants become demands when backed by purchasing
power.
• Demand in economics means "the desire to have a
commodity or service and the willingness and capacity to
spend a certain amount of money".

3. Factors that Affect
Demand
• Change in Consumers’ Incomes: The influence of
consumers' income on demand depends on whether the
good is normal good or inferior good.
• The Prices of Related products : Products or goods
are either related or unrelated to each other for
consumers. When two goods are unrelated, then the
change in the price of one good will have no impact on
the demand for the other good. The availability and price
of related goods affect the demand for goods and
services.

4. Factors that Affect
Demand
• Expectations about the Future: If the price of a product
is expected to rise in the future, current demand
increases. If consumers’ income is expected to rise in
the future, current demand increases.
• Tastes and Preferences: People with the same income
have different demands if they have different
preferences. If the taste is in favour of the good, demand
for it will increase. The opposite is true

5. Factors that Affect
Demand
• The Number of Buyers in the Market (Population):
The larger the population or the buyers of the products,
the greater is the demand for the products.
• Advertisement Expenditure: More advertisement
expenditure on products and goods means more the
buyers will get to know about it, resulting into increase in
demand.

6. Supply
• The supply of a product is defined as the various
quantities of it that sellers will place on market at all
possible alternative prices, other things being equal.
• The supply of a product or service refers to the quantities
of a product or a service that producers are willing and
able (ready) to produce (sell) at different prices in a
given time period.
• Supply is derived from a producer's desire to maximize
profits.
• Supply is an expression of seller’s plans or intentions –
an offer to sell – not a statement of actual sales.

7. Factors Affecting Supply
Aside from the price of the products, there are other factors,
which affect the suppliers' willingness and ability to supply a
good or service. Determinants of market supply include:
• Change in the Cost of Factors of Production: A supplier
combines raw materials, capital, and labour to produce the
output. The costs of production are the primary determinant of
supply.
• Changes in Technology: New technologies means that
either production increases with the same level of resources
or that fewer resources are needed to produce the same level
of output. If fewer resources are needed to produce the same
level of output when technology increases then production
costs will fall causing supply to increase.

8. Factors Affecting Supply
• Changes in the Price of Related Products: Similar to
demand where products are related in consumption,
products are also often related in production. The prices
of related products or services that firms produce
influence supply. It depends on whether the products are
substitutes or complements.
• Expectations about the Future: If the price of a product
or service is expected to fall in the future, current supply
increases. If firms anticipate a rise in price, they may
choose to hold back the current supply to take
advantage of the higher future price, thus decreasing
market supply

9. Factors Affecting Supply
• Number of Sellers: The larger the number of sellers or
suppliers of a products or services , the greater is the
supply of the products.

10. References
• Block-5 MLI-102 Unit-16 of IGNOU
http://egyankosh.ac.in/handle/123456789/11066
• e-Notes by Dr. Mohammed Alwosabi
http://staff.uob.edu.bh/files/620922311_files/micro-
Notes3.pdf

11. Thank You