Factors Affecting Demand
Income - when income rises the demand for goods will also rise. for example if someones income rises they are more likely to spend more money on a holiday. These are all normal goods, when income rises demand rises. For inferior goods, the demand will fall when income rises, e.g. supermarket own brand goods and public transport are all inferior goods.
Advertising - If a product is heavily advertised the demand for the product is likely to increase.
Population - as the population increases the demand increases, although the demand relies on the structure of the population. if the population of babies grows, the demand for baby products will increase, such as cribs and baby clothes. if there is more women then men, the demand for women's products will increase. There is also more people in urban areas, so in urban areas there is a higher demand for hospitals and schools etc. Many countries have ethnic groups in their population structure, so if there is a large number of people from a certain ethnic group there will be a higher demand for products associated with their culture.
Fashion - fashions and tastes change frequently, if something suddenly becomes in fashion the demand for this good increases.
Prices of substitutes - many goods have substitutes, the price of substitutes affects demand. a substitute for coca cola would be pepsi, if pepsi lowered their prices the demand for pepsi would increase and the demand for coca cola would fall.
Prices of complements - some goods are purchased together by consumers, because they are used together by consumer, e.g. if someone buys cornflakes they are likely to buy milk. the demand relies on complementary goods, if the price for milk increased the demand for cornflakes will likely fall
- Fashion - Advertising
- Price - Interest rates
- Income - Price of complements
- Population - price of substitutes
Income - when income rises the demand for goods will also rise. for example if someones income rises they are more likely to spend more money on a holiday. These are all normal goods, when income rises demand rises. For inferior goods, the demand will fall when income rises, e.g. supermarket own brand goods and public transport are all inferior goods.
Advertising - If a product is heavily advertised the demand for the product is likely to increase.
Population - as the population increases the demand increases, although the demand relies on the structure of the population. if the population of babies grows, the demand for baby products will increase, such as cribs and baby clothes. if there is more women then men, the demand for women's products will increase. There is also more people in urban areas, so in urban areas there is a higher demand for hospitals and schools etc. Many countries have ethnic groups in their population structure, so if there is a large number of people from a certain ethnic group there will be a higher demand for products associated with their culture.
Fashion - fashions and tastes change frequently, if something suddenly becomes in fashion the demand for this good increases.
Prices of substitutes - many goods have substitutes, the price of substitutes affects demand. a substitute for coca cola would be pepsi, if pepsi lowered their prices the demand for pepsi would increase and the demand for coca cola would fall.
Prices of complements - some goods are purchased together by consumers, because they are used together by consumer, e.g. if someone buys cornflakes they are likely to buy milk. the demand relies on complementary goods, if the price for milk increased the demand for cornflakes will likely fall
- Fashion - Advertising
- Price - Interest rates
- Income - Price of complements
- Population - price of substitutes