What Factors Might Increase The Demand For Bonds? The Supply?

half dozen Important Factors That Influence the Demand of Goods

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The need changes as a result of changes in price, other factors determining information technology being held constant. Nosotros shall explain below in detail how these other factors determine market place demand for a commodity.

These other factors determine the position or level of demand curve of a commodity.

It may exist noted that when there is a change in these non-price factors, the whole curve shifts rightward or leftward equally the instance may be. The following factors determine market need for a commodity.

1. Tastes and Preferences of the Consumers:

An important factor which determines the demand for a good is the tastes and preferences of the consumers for it. A good for which consumers' tastes and preferences are greater, its need would be large and its demand bend will therefore lie at a higher level. People's tastes and preferences for various goods often change and every bit a event in that location is change in need for them.

The changes in demand for diverse appurtenances occur due to the changes in fashion and besides due to the pressure of advertisements by the manufacturers and sellers of dissimilar products. On the contrary, when certain goods leave of mode or people's tastes and preferences no longer remain favourable to them, the need for them decreases.

2. Income of the People:

The demand for goods also depends upon the incomes of the people. The greater the incomes of the people, the greater will be their need for goods. In drawing the demand schedule or the demand curve for a skilful we take income of the people as given and constant. When every bit a result of the rise in the income of the people, the demand increases, the whole of the demand curve shifts upwards and vice versa.

The greater income means the greater purchasing power. Therefore, when incomes of the people increase, they can afford to purchase more than. It is because of this reason that increase in income has a positive result on the demand for a adept.

When the incomes of the people fall, they would need less of a good and every bit a result the demand curve will shift downward. For instance, as a outcome of economic growth in India the incomes of the people have greatly increased owing to the big investment expenditure on the development schemes by the Government and the private sector.

Equally a event of this increase in incomes, the demand for adept grains and other consumer goods has profoundly increased. Likewise, when because of drought in a twelvemonth the agronomics production greatly falls, the incomes of the farmers decline. Every bit a result of the decline in incomes of the farmers, they will need less of the cotton fiber material and other manufactured products.

3. Changes in Prices of the Related Goods:

The demand for a adept is also affected by the prices of other goods, especially those which are related to it as substitutes or complements. When we draw the demand schedule or the need curve for a skilful we take the prices of the related goods every bit remaining abiding.

Therefore, when the prices of the related appurtenances, substitutes or complements, change, the whole demand curve would alter its position; it will shift upward or downward every bit the instance may be. When the price of a substitute for a good falls, the demand for that good volition decline and when the toll of the substitute rises, the need for that good volition increment.

For example, when toll of tea and incomes of the people remain the same but the cost of coffee falls, the consumers would demand less of tea than earlier. Tea and java are very close substitutes. Therefore, when coffee becomes cheaper, the consumers substitute coffee for tea and as a consequence the need for tea declines. The goods which are complementary with each other, the fall in the price of any of them would favorably affect the need for the other.

For example, if price of milk falls, the demand for sugar would likewise be favorably affected. When people would have more milk, the demand for sugar volition likewise increment. Likewise, when the price of cars falls, the quantity demanded of them would increase which in turn will increment the demand for petrol.

4. Advertisement Expenditure:

Advertisement expenditure made past a firm to promote the sales of its product is an important factor determining demand for a product, particularly of the product of the firm which gives advertisements. The purpose of advertisement is to influence the consumers in favour of a product. Advertisements are given in various media such as newspapers, radio, and television. Advertisements for appurtenances are repeated several times so that consumers are convinced about their superior quality. When advertisements prove successful they cause an increase in the demand for the product.

5. The Number of Consumers in the Market:

The marketdemandfor a good is obtained by adding up the private demands of the present as well every bit prospective consumers of a good at various possible prices. The greater the number of consumers of a proficient, the greater the marketplace demand for it.

Now, the question arises on what factors the number of consumers for a good depends. If the consumers substitute one proficient for another, then the number of consumers for the expert which has been substituted by the other volition decline and for the adept which has been used in place of the others, the number of consumers will increment.

Besides, when the seller of a good succeeds in finding out new markets for his skilful and as a result the market place for his good expands the number of consumers for that good will increase. Some other important cause for the increase in the number of consumers is the growth in population. For example, in Republic of india the demand for many essential goods, especially food grains, has increased because of the increase in the population of the land and the resultant increase in the number of consumers for them.

6. Consumers' Expectations with Regard to Future Prices:

Another cistron which influences the need for appurtenances is consumers' expectations with regard to futurity prices of the goods. If due to some reason, consumers expect that in the near future prices of the appurtenances would rise, then in the nowadays they would demand greater quantities of the appurtenances and so that in the future they should not accept to pay college prices. Similarly, when the consumers expect that in the hereafter the prices of goods volition fall, so in the present they will postpone a part of the consumption of goods with the result that their present need for goods will decrease.

Increase in Need and Shifts in Demand Bend :

When demand changes due to the factors other than price, there is a shift in the whole demand bend. Equally mentioned higher up, apart from toll, demand for a article is determined by incomes of the consumers, his tastes and preferences, prices of related goods. Thus, when there is any change in these factors, it volition crusade a shift in need curve.

For example, if incomes of the consumers increase, say due to the hike in their wages and salaries or due to the grant of dearness allowance, they will demand more than of a good, say cloth, at each price. This will cause a shift in the demand curve to the correct. Similarly, if preferences of the people for a article, say color TV, become greater, their demand for colour Boob tube will increase, that is, the demand bend will shift to the correct and, therefore, at each cost they will need more colour TV.

The other of import factor which can cause an increase in demand for a commodity is the expectations about futurity prices. If people expect that price of a article is probable to go upwards in future, they will try to purchase the commodity, especially a durable i, in the electric current period which will boost the current demand for the goods and cause a shift in the demand curve to the correct.

Equally seen above, the prices of related commodities such every bit substitutes and complements can also change the demand for a commodity. For instance, if the price of java rises other factors remaining the constant, this will cause the demand for tea, a substitute for java, to increment and its demand curve to shift to the correct.

Subtract in Demand and Shift in the Demand Curve :

If there are adverse changes in the factors influencing need, information technology will atomic number 82 to the subtract in need causing a shift in the demand curve. For example, if due to inadequate rainfall agricultural output in a year declines this will crusade a fall in the incomes of the farmers. This fall incomes of the farmers will crusade a subtract in the demand for industrial products, say textile, and will upshot in a shift in the demand bend to the left.

Similarly, change in preferences for bolt can as well bear on the demand. For case, when colour TVs came to Republic of india people's greater preference for them led to the increment in their demand. Simply this brought almost decrease in need for black and white TVs causing leftward shift in need bend for these black and white TVs.

The decrease in demand does non occur due to the rise in price merely due to the changes in other determinants of demand. Decrease in demand for a commodity may occur due to the autumn in the prices of its substitutes, rise in the prices of complements of that commodity and if the people expect that price of a good will autumn in time to come.