In this article, we will have an understanding of the concept of Demand, and the determinants of demand. This topic is very important for any SSC exam as well as for other competitive exams. The topic always plays an important role in boosting your marks and especially a major role in SSC CGL EXAM and Banking exams of all level.
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Demand – In economics, demand refers to the consumer’s willingness and ability to buy goods or services by paying money. It is a significant factor that drives economic growth and expansion. No business can ever survive in the absence of demand.
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Determinants of Demand– Determinants of demand are the factors that cause changes or fluctuations in economic demand for goods or services.
- These are broadly divided into five different categories, which are as follows:
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Consumer Preferences: This includes personality characteristics, advertising, product quality, age, and occupation. These are all key factors determining consumer behavior and, therefore, demand.
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Commodity Prices: An increase in the price of a product will result in a decrease in the quantity demanded of the complementary product. Conversely, an increase in the price of a product will lead to an increase in the demand for the substitute product.
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Consumer Income: Higher the income of the consumer, the higher will be the demand, and lower income will lead to less demand.
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Consumer Expectations: Expectations of higher income or higher prices increase the quantity demanded. The expectation of lower income or lower prices reduces the quantity demanded.
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Price of Related Goods: Prices of related goods directly impact the demand for the product.
- Other Factors: Besides these, some other factors like Climate and weather conditions, government policies, social activities, the Number of Consumers in the Market, the overall status of trade in the economy, income distribution in the country, etc. also affect the demand for products or services.
Any variation in these factors, whether increase or decrease will affect demand resulting in a shift in the demand curve. Depending on whether it is an inward or outward change, the quantity demanded will change.
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