INFLUENCES

OF DEMAND

-Wania Tahir
Introduction
There are a range of factors other than price which affect an individual's demand for a
good or service. These conditions of demand affect how much an individual will demand at
each price.

Range of factors than influence demand are:

1. Income

2. substitutes or complements

3. Tastes

4. Expectation of future prices

5. Size, age, gender distribution of population

6. Distribution of income
Income:
Here we need to distinguish between normal and
inferior goods. A normal good is one for which
the demand rises as income rises and falls as
income falls. This applies to most goods and Nominal good: a good who’s
demand rises as income rises and
services. However ,there are some exceptions to falls as income falls
this. For example, during the recession in the UK Inferior goods : a good whose
demand falls as income rises and
in 2010-2011 as unemployment rose and rises as income falls
consumers' incomes fell many supermarkets
found their sales of low price "value" own brands
increased.
Substitutes or
Complements The price of other goods : Many goods are
related to one another as substitutes or
complements.
Coffee and tea are, for many people,
substitutes for one another. The demand for
coffee will vary directly with the price of tea.
If the price of tea rises individuals will
reduce their demand for tea and switch to
coffee. The demand for coffee will therefore
increase. The opposite will happen if the
price of tea falls.

Substitutes: goods that are alternatives to one other

Complement : goods that’s are consumed together

 Tastes

This relationship is relatively straightforward in

that individuals are unlikely to buy goods they do
not like. The more attractive individuals find a
particular product the greater their demand for it is
likely to be. However, it is important to remember
that our tastes and preferences can be swayed and
influenced by intensive advertising and promotion
campaigns
Expectations of future prices:
.

Some products are purchased because

of their investment potential.
Individuals may buy these products
in the hope that their price will rise
and they can be sold at a profit in the
future. Examples of such products are
houses, shares and antiques. If
individuals believe the price of such
goods is likely to rise in the future
this may lead to an increase in
demand..
 Size, age and gender distribution of the
population

Generally the overall demand for most

goods and services will rise and fall as
the population rises and falls. Changes
in the age and gender
distribution of the population will
influence the pattern of demand for
particular goods and service. E.g. if
there is more population of kids than
kids demand for goods and service will
rise.
Distribution of Generally if the income distribution in a country
becomes more even, the demand for most normal
income goods increases. If the distribution becomes less
even, the demand for basic necessities and luxury
goods will be affected depending on the nature of
the change in distribution. It is likely that the
demand for both luxury and interior goods would
increase.
Thank
you!!