Demand refers to the desire of a consumer to purchase goods and services and ability to pay a price for the goods and services purchased. No business will produce anything, without consumers demand
Demand is an important factor for expansion and economic growth.
For instance, if the price of goods or services increases will lead to decrease in the demand of goods and services by the consumer, and vice versa
Determinants of Demands:
They are as follows:
Price of the product:
Price plays an important factor in making decisions if all other factors remain constant.
Increase in demand follows reduction in price and similarly, decrease in cost of goods and services will increase the demand
Income of consumer
Income and demand is directly proportional
When the income rises, the demand for goods and services increases. When the income fall, the demand will decrease simultaneously
Price of related goods and services
Complementary products – complementary goods are goods that are used together. When the price of a particular item changes, it changes the demand of that item as well as the complement. Example: Increase in the price of a car will reduce the demand for petrol.
Substitute Product –Substitute products are those products which are used for the same purpose. Example: Price of tea increases then the demand for coffee increases and the demand for tea decreases.
Consumer Expectations
When consumer expect value of something will increase , they demand more of it
For ex, if the vehicle price is expected to increase, people buy more
Number of Buyers in the Market
The number of buyers plays a major effect on the total demand
As the number of buyer increases, the demand rises and vice versa