Determinants of Demand

By, Carol Peters Prabhu,

I BBM,
Mahesh College of Management
Change in price of the commodity - the relationship
between price and quantity demanded is inverse
(indirect) in nature

Changes in Population: There is a direct relationship
between changes in the size of the population and changes
in the demand for goods and services

Changes in Climatic Conditions: Demand for goods and
services changes with changes in climatic conditions



Changes in Income: As income increases,
demand for goods and services also increases and
vice versa

Changes in Distribution of Income and Wealth
Equal distribution of income and wealth will
increase the total demand for goods and services,
while inequalities reduce the total demand

Changes in the supply of money: Changes in the supply
of the money in the economy also affect the demand for
goods and services.

Advertisement and Publicity: A clever and persistent
advertisement and publicity programmes will affect
consumer's preferences and cause changes in the
demand for products.

Changes in Substitutes: Changes in the supply of
substitutes, change in their prices, and the development of
new and better quality substitutes certainly influence
demand for the given product. For example, the emergence
of ball-point pens has reduced the demand for fountain
pens.

Changes in Prices of Complementary Goods: Demand for
goods and services changes due to a change in the prices of
complementary goods

Speculation: Expectation of future changes in prices is
another factor influencing the demand for goods and
services.

Changes in Fashions, Tastes and Preferences: Changes
in fashions, tastes, habits and preferences of the
consumers also bring about changes in demand for
goods and services


Change in the Level of Taxation: Direct taxes reduce
demand for goods and services by reducing disposable
income of the people. On the other hand, an increase in
public expenditure will increase disposable income and
thereby increases the demand for goods.

Demonstration Effect: This is also called Dussenberry
Effect, named after the economist Dussenberry. It means
a blind imitation (copying) of the superior living styles of
others.