Determinats of demand

The demand for a commodity is influence by several factors.The main determinants of demand are price of the commodity,price of related commodities,size of income,test and performance of consumers and so on.The analysis of demand when all these factors change simultaneously is difficult.Hence,when demand is analysed on the basis of only one factors are assumed to be constant.For example,the effect of change in price on demand is analysed assuming all other factors constant.The major determinants of demand are explained below.

1. Price of the commodity :Traditionally,the own price of the commodity is the most important determinant of demand.For most of the commodities when the price fall,the income of consumers,preference and taste,price of all other commodities remaining constant,the demand for that commodity increase.
2. Price of related commodities:Some of the goods are related to each other.The goods may be either substitute or complementary goods.For example,tea and coffee are substitute goods and tea and sugar are complementary goods.The substitute goods that have essentially the same use.On the other hand,the goods often used together are called complements.
3. Consumers income :The demand for a commodity is also affected by consumer's money income.The change in money income leads to the change in quality demanded of a commodity.This applies in case of almost all commodities and almost all individuals.
4. Taste and preference :Taste and preference change from time.If the taste for a commodity is strong,the quantity demanded will be high and if there is a loose test for a commodity,the quantity demanded will be low.For example,once the demand for 'Rangeela cap' was high among girls,but not so at present.
5. Population and composition:The size and composition of population also influence the market demand.The demand varies directly with the size of the population.If the size of the population is large,The demand for normal goods will be high.The consumption of population such as proportion of male-female,rich-poor,child-adult,also affect the demand for a commodity.
6. Consumers expectation :The demand may demand on expectations of people's relating to price and availability of goods.It there is expectation of price fail,present demand will be less and vice versa.Likewise,if there is expectation of the shortage of a commodity in future,present demand will be high.Because,people feel that the commodity may not be available in future or price may be higher in future than at present.The reserve will happen if these is expectation of glut of commodity.
7. Advertisement expenditure :The advertisement helps to increase the demand for a commodity.The advertisement definitely increase the demand for a commodity by informing people as to the availability of goods,by showing the goods superior than the goods of rival firms and by changing people's taste and preference.The relation between advertisement expenditure and the quantity of sales has been illustrated in figure.
8. Distribution of national income :The demand is also affected by the distribution of national income.If the distribution of national income is very unequal,some people are very rich and majority of people are poor.In this situation,demand for luxury goods will be high.