Factors That Affect Product Demand

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There are various factors affecting the demand for a commodity.

They are:

1.Price of the good: The price of a commodity is an important determinant of demand. Price and demand are inversely related. Higher the price less is the demand and vice versa.

2.Price of related goods: The price of related goods like substitutes and complementary goods also affect the demand. In the case of substitutes, rise in price of one commodity lead to increase in demand for its substitute. In the case of complementary goods, fall in the price of one commodity lead to rise in demand for both the goods.

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3.Consumer’s Income: This is directly related to demand. A change in the income of the consumer significantly influences his demand for most commodities. If the disposable income increases, demand will be more.

4.Taste, preference, fashions and habits: These are very effective factors affecting demand for a commodity. When there is a change in taste, habits or preferences of the consumer, his demand will change. Fashions and customs in society determine many of our demands.

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5.Population: If the size of the population is more, demand for goods will be more .The market demand for a commodity substantially changes when there is change in the total population.

6.Money Circulation: More the money in circulation, higher the demand and vice versa.

7.Value of money: The value of money determines the demand for a commodity in the market. When there is a rise or fall in the value of money there may be changes in the relative prices of different goods and their demand.

8.Weather Condition: Weather is also an important factor that determines the demand for certain goods.

9.Advertisement and Salesmanship: If the advertisement is very attractive for a commodity, demand will be more. Similarly if the salesmanship and publicity is effective then the demand for the commodity will be more.

10.Consumer’s future price expectation: If the consumers expect that there will be a rise in prices in future, he may buy more at the present price and so his demand increases.

11.Government policy (taxation): High taxes will increase the price and reduce demand, while low taxes will reduce the price and extend the demand.

12.Credit facilities: Depending on the availability of credit facilities the demand for commodities will change. More the facilities higher the demand.

13.Multiplicity of uses of goods: if the commodity has multiple uses then 

the demand will be more than if the commodity is used for a single 

purpose.

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