Determinants of Demand
The demand for a product depends on a number of factors. If any one of these criteria changes, then the demand for the product will change. The following criteria are mentioned:
(1) Tastes and Preferences of the Consumers:
Consumer tastes and preferences determine the demand for a product. The higher the consumer's taste and preference for the product, the higher the demand for the product will be and the demand line will go up. Again, the demand for the product on which the consumer's taste and preference will be less and the demand line will be downward. In other words, if the consumer's taste and preference for different products changes, the demand for those products will also change.
(2) Income of the consumer:
The increase or decrease of demand depends on the income of the consumer. The higher the consumer's income, the higher his purchasing power. Conversely, the lower the consumer's income, the lower his purchasing power will be. Suppose your daily income is $ 50. You spend $ 20 on cigarettes and the remaining $ 30 on daily necessities. If your daily income increases to $ 70, you will spend $ 30 for cigarettes and $ 40 for daily necessities. As your income increases, your purchasing power increases, so you have more cigarettes and daily necessities. The demand for cigarettes and everyday items has increased and their demand line will move upwards.
Therefore, we can say that if the consumer's income is higher, the demand for the product will increase. This type of product is called Normal Goods. Similarly, if there is less rainfall in a year, then agricultural products will be less produced. As a result, the income of the farmer will be less. That means the purchasing power of the farmer will decrease. Then the farmer will buy less cotton cloth or other manufactured goods than before. As a result, demand for cotton or other manufactured goods will decrease and their demand line will go down. Therefore, we can say that the lower the consumer income, the lower the demand for the product.
(3) Changes in the prices of the related goods:
The demand for a commodity will change if there is a change in the prices of the related commodities, especially the substitute or complementary goods.
When the price of a commodity changes, the demand for its alternative commodity changes. For example, coffee is an alternative to tea. If the price of tea goes up but the consumer’s income and the price of coffee remain the same, then the consumer will be forced to reduce the amount of tea he drinks. As a result, the demand for coffee will increase. Similarly, if the price of rice increases, the demand for wheat increases. On the other hand, if the demand for one of the complementary products increases, the demand for the other will also increase. Conversely, as the demand for one decrease, so does the demand for the other. For example, when the price of milk goes down, consumers will buy more milk. Or make a lot of foods with milk. As a result, consumers will buy more sugar. As a result, if the demand for milk increases, the demand for sugar will also increase. Similarly, lower car prices will increase car demand. As a result, the demand for petrol will increase. If the demand for pens increases, the demand for ink will also increase.
(4) The number of consumers in the market:
The higher the number of consumers of a product, the higher the market demand. There are many reasons why the number of consumers of a product may increase. If the seller of the product can find a new market to sell his product, then the market of the product will expand and the number of consumers of that product will increase. Again, the population increases and the number of consumers increases. For example, due to the rapid population growth in Bangladesh, the number of consumers for food, clothing, shelter, etc. is increasing. Similarly, the more people leave the village and come to the city, the more the number of consumers of tea, bread, cigarettes etc. increases.
(5) Changes in propensity to consume:
What do we mean by propensity to consume? Consumers tend to consume any product or service called propensity to consume. Suppose, the desire of the people to smoke cigarettes has increased. The consumption of cigarettes has increased. The demand changes as the consumption of the people changes. if the consumer's consumption of any product increases, he buys more from his fixed income. In other words, if the consumer's tendency to consume decreases, then the consumer will buy less of the product.
Others determinants of Demand
(6) Consumer's expectation
(7) (Income distribution
(8) Liquidity preference of consumer
(9) Changes in season
(10) Trade-cycle