Factors Affecting Demand
Innumerable factors and circumstances could affect a buyer's willingness or ability to buy a good. Some of the more common factors are:
- Good's own price: The basic demand relationship is between potential prices of a good and the quantities that would be purchased at those prices. Generally the relationship is negative meaning that an increase in price will induce a decrease in the quantity demanded. This negative relationship is embodied in the downward slope of the consumer demand curve. The assumption of a negative relationship is reasonable and intuitive. If the price of a new novel is high, a person might decide to borrow the book from the public library rather than buy it.
- Personal Disposable Income: In most cases, the more disposable income (income after tax and receipt of benefits) you have the more likely you are to buy.
- Tastes or preferences: The greater the desire to own a good the more likely you are to buy the good There is a basic distinction between desire and demand. Desire is a measure of the willingness to buy a good based on its intrinsic qualities. Demand is the willingness and ability to put one's desires into effect. It is assumed that tastes and preferences are relatively constant.
- Consumer expectations about future prices and income: If a consumer believes that the price of the good will be higher in the future he is more likely to purchase the good now. If the consumer expects that his income will be higher in the future the consumer may buy the good now.
- Population:If the population grows this means that demand will also increase.
- Nature of the good:If the good is a basic commodity, it will lead to a higher demand
- This list is not exhaustive. All facts and circumstances that a buyer finds relevant to his willingness or ability to buy goods can affect demand. For example, a person caught in an unexpected storm is more likely to buy an umbrella than if the weather were bright and sunny.
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