Different variables determine the market
demand for goods and services like price of the commodity itself, the prices of
related goods, consumers’ income and tastes of the consumers.
The change in the price of the commodity is shown by a movement from one point to another on the same demand curve, while the effect of changes in other factors is demonstrated by a shift of the demand curve. Demand is affected by several other factors, as the distribution of income, size of the population and its structure, wealth, credit availability, stocks and habits. The last two factors allow for the influence of past behavior on the present, thus rendering demand analysis dynamic.
The change in the price of the commodity is shown by a movement from one point to another on the same demand curve, while the effect of changes in other factors is demonstrated by a shift of the demand curve. Demand is affected by several other factors, as the distribution of income, size of the population and its structure, wealth, credit availability, stocks and habits. The last two factors allow for the influence of past behavior on the present, thus rendering demand analysis dynamic.
Main determinants of market demand.
Price of the Product:
The demand for a good has a negative relationship with its own price. A rise in the price of commodity X, causes the demand of X to decline and vice versa. The buyers of a commodity can be classified into two kinds: marginal and intra-marginal buyers. Intra-marginal buyers increase or decrease their consumption of a commodity but do not give up or start their consumption when faced with changed conditions such as variations in price. Marginal buyers will start their consumption of the good if price fall or stop their consumption if price rises. The income and substitution effects explain the behaviour of intra-marginal consumers. As the price of a commodity falls, prices of other goods remaining unchanged, the commodity becomes relatively cheaper and therefore, its demand increases. Thus, the substitution effect is always negative. A fall in price of the commodity, other things remaining constant, increases the real income of the consumer buying the commodity whose price has fall. This, in turn, increases consumer’s demand for superior goods and decreases their demand for inferior goods.
Thus, the income effect of a change in price is negative for superior goods and positive for inferior goods. Since a change in price gives rise to both substitution and income effects, the sum of these two effects measures the price effect. For superior goods both substitution and income effects, work in the same direction while for inferior goods they work in the opposite direction.
The demand for a good has a negative relationship with its own price. A rise in the price of commodity X, causes the demand of X to decline and vice versa. The buyers of a commodity can be classified into two kinds: marginal and intra-marginal buyers. Intra-marginal buyers increase or decrease their consumption of a commodity but do not give up or start their consumption when faced with changed conditions such as variations in price. Marginal buyers will start their consumption of the good if price fall or stop their consumption if price rises. The income and substitution effects explain the behaviour of intra-marginal consumers. As the price of a commodity falls, prices of other goods remaining unchanged, the commodity becomes relatively cheaper and therefore, its demand increases. Thus, the substitution effect is always negative. A fall in price of the commodity, other things remaining constant, increases the real income of the consumer buying the commodity whose price has fall. This, in turn, increases consumer’s demand for superior goods and decreases their demand for inferior goods.
Thus, the income effect of a change in price is negative for superior goods and positive for inferior goods. Since a change in price gives rise to both substitution and income effects, the sum of these two effects measures the price effect. For superior goods both substitution and income effects, work in the same direction while for inferior goods they work in the opposite direction.
Price of Related Goods:
The prices of related goods also affect the demand for a good. Related goods may be substitutes or complementary goods. Substitutes are goods that serve as replacements for one another. The number and price of substitute goods (i.e. competitive goods) also determine the demand for a good. The higher the price of substitute goods, the more will be the demand for this good as people switch from the substitutes. A fall in the price of a good causes a decline in demand for its substitutes. To be substitutes, two products essentially need not be identical. Identical products are known as perfect substitutes. American cars are not same as Japanese care. Nevertheless, all have some common characteristics as four wheels, capable of carrying people, and run on gasoline. Thus, significant changes in the price of one country’s cars can be expected to influence demand for the other country’s cars. Restaurant meals are substitutes for meals made at home, and flying from New Delhi to Bombay is a substitute for taking the train.
Complementary
goods are those that are consumed together; bread and butter, shoes and socks, pen
and ink. An increase in the price of complementary goods, the less of them will
be bought. If you write more letters, the more you will demand stamps and
stationery, and as you send more e-mails the more you will need internet
access. During a price war among the airlines when travel became less
expensive, the demand for taxi service to and from airports increased. When two
goods are complements, a decrease in the price of one results in increase in
demand for the other, though its price has not fallen and vice versa.
A given commodity may have many potential substitutes and complements at the same time, a single price change may affect a consumer’s demand for many goods simultaneously; the demand for some of these products may increase while the demand for others may decrease. For example, massive amount of data can now be stored digitally on CDs that can be read by personal computers with a CD-Rom drive. As more and more the price of CDs and CD hardware is falling, demand for encyclopedia printed on paper is falling.
Consumer’s Income:
Income of a consumer determines his purchasing power and so it is the basic determinant of the demand for a product. People with higher current disposable income demand more goods and services than those with lower income. Product’s own price, the prices of related goods are significant in the short run, while income as a determinant of demand is significant both in the short and long run. Income as a determinant of demand has varied relationship depending upon the nature of the commodity. The business executives, therefore, have to be fully aware of the nature of goods they are dealing with and their relationship with the consumers’ income.
Consumer goods and services may be classified under four categories for the purpose of income-demand relationship.
(i) Essential consumer goods,
(ii) Normal goods,
(iii) Inferior goods
(iv) Luxury Goods
The effect of variation in income on each of these goods is discussed in brief.
Essential consumer goods:
Essential consumer goods are those goods and services that are consumed by all persons of a society. They are items of ‘basic needs’ such as minimum clothing, housing, food grains, salt, vegetable oils, matches, cooking fuel etc. Demand for essential goods increase with increase in consumer’s income but only up to a certain point where basic needs are fulfilled. Beyond that point expenditure on this category of goods go for improving the quality of goods. Fig.3.1 illustrates the relationship of essential consumer goods and income. The curve B shows that a consumer’s demand for essential goods increases only until his income rises to OY2. Beyond this level it tends to saturate.
Essential consumer goods are those goods and services that are consumed by all persons of a society. They are items of ‘basic needs’ such as minimum clothing, housing, food grains, salt, vegetable oils, matches, cooking fuel etc. Demand for essential goods increase with increase in consumer’s income but only up to a certain point where basic needs are fulfilled. Beyond that point expenditure on this category of goods go for improving the quality of goods. Fig.3.1 illustrates the relationship of essential consumer goods and income. The curve B shows that a consumer’s demand for essential goods increases only until his income rises to OY2. Beyond this level it tends to saturate.
Normal goods:
Goods for which demand goes up when income is higher and goes down when income is lower are called normal goods. Cinema tickets, restaurant foods, toothpaste, and shirts are all normal goods. Curve C in the Fig.1 shows the income-demand relationship of normal goods.
Goods for which demand goes up when income is higher and goes down when income is lower are called normal goods. Cinema tickets, restaurant foods, toothpaste, and shirts are all normal goods. Curve C in the Fig.1 shows the income-demand relationship of normal goods.
Inferior goods:
An inferior good is one whose demand decreases when the consumer’s income increases. In case of inferior goods it is negative income effect. As the level of income goes up the consumers are known to traveling by taxi rather than by bus; start smoking cigarettes in place of bidi; use cooking gas rather than kerosene; shift to wheat and rice from millet. Demand for inferior goods rises only up to a certain level of income, beyond this level demand declines with the increase in income. Curve A in Figure shows the behavior of inferior goods to rise in income.
An inferior good is one whose demand decreases when the consumer’s income increases. In case of inferior goods it is negative income effect. As the level of income goes up the consumers are known to traveling by taxi rather than by bus; start smoking cigarettes in place of bidi; use cooking gas rather than kerosene; shift to wheat and rice from millet. Demand for inferior goods rises only up to a certain level of income, beyond this level demand declines with the increase in income. Curve A in Figure shows the behavior of inferior goods to rise in income.
Prestige or luxury goods:
Large number of goods and services available in every economy may be categorized in a number of groups. This analysis is important in order to carry out a meaningful market demand analysis for taking business decisions. A clear understanding of demand at various levels of aggregate demand is essential for a business firm for taking policy decisions.
Demand for firm’s products and industry’s products:
The shape of the demand curve of a firm differs according to the degree of competition in the market.
In
pure competition the demand of the individual firm is perfectly
elastic. Pure competitive market assumes homogeneous product and large
number of seller. An individual firm, however, large, offers a very
small part of the total quantity in the market. Hence it cannot affect
the price and output in the market. The firm takes the price as
determined by the market. The market price is determined by the market
supply and demand functions and at this price the firm can sell any
amount it wishes.
In monopoly a firm is also the industry. Therefore the firm’s demand is also the demand of the industry. The monopolist decides his price and output on the basis of his downward sloping market demand. This implies that the monopolist in order to sell more has to reduce the price. In monopolistic competition the demand of the individual firm is downward sloping, as is the market demand. The product differentiation has given a firm some freedom to decide its own price. Each firm has its own customers, who have a preference for its products. In oligopoly market situation various shapes of the firm’s demand curve have been suggested. There is a great uncertainty regarding the demand curve of the oligopoly, due to the interdependence of competitors and the uncertainty as to their reaction to any particular decision of a firm within the group. The aggregate of the demands of individual firms is the industry’s demand.
Individual and market demand:
The demand for a commodity by an individual buyer is called individual demand while the demand for a commodity by all individual buyers taken together in a market is called market demand.
In monopoly a firm is also the industry. Therefore the firm’s demand is also the demand of the industry. The monopolist decides his price and output on the basis of his downward sloping market demand. This implies that the monopolist in order to sell more has to reduce the price. In monopolistic competition the demand of the individual firm is downward sloping, as is the market demand. The product differentiation has given a firm some freedom to decide its own price. Each firm has its own customers, who have a preference for its products. In oligopoly market situation various shapes of the firm’s demand curve have been suggested. There is a great uncertainty regarding the demand curve of the oligopoly, due to the interdependence of competitors and the uncertainty as to their reaction to any particular decision of a firm within the group. The aggregate of the demands of individual firms is the industry’s demand.
Individual and market demand:
The demand for a commodity by an individual buyer is called individual demand while the demand for a commodity by all individual buyers taken together in a market is called market demand.
Demand for durable and non-durable goods:
Both consumer and producer goods are further classified into durable and non-durable goods Durable goods are those whose usefulness is not exhausted in a single or short-run use. They can be used repeatedly or continuously over a period of time. Durable goods partly satisfy new demand and partly replace old items. They are more expensive than the non-durable goods. Their demand depends on current market conditions vis-à-vis expected market conditions in future. Durable goods may be consumer goods as well as producer goods. Durable consumer goods include cars, scooters, furniture, houses, clothes, shoes, washing machine etc. Durable producers’ goods include items such as buildings, office furniture and fixtures, plant and machinery etc. These goods are generally called “fixed assets’.
Non-durable goods are those goods that perish or become unusable after sometime. They can be used or consumed only once and their utility is exhausted in a single use. Non-durable goods are also classified into non-durable consumer goods and non-durable producers’ goods. The former include all items of food, drinks, soaps, cooking fuel, cosmetics, lighting, milk, fish, eggs, paper cups and plates. Raw materials, fuel and power, finishing material and packing items fall under the latter category.
Autonomous demand and derived demand :
Demand that arises on its own out of a natural desire to consume or for satisfying human wants directly is called direct or autonomous demand. Autonomous demand is not tied with any other good. It is independent of the demand for some other goods. Demand for food, clothes, shelter, soaps, toothpastes, tape recorders, TV sets, etc., is an autonomous demand. Demand for all producer goods is derived demand as they are needed to produce consumer or producer goods. However, there is hardly anything whose demand is totally independent of the demand for other goods. But the extent of this dependence varies widely from product to product. Autonomous demand may also arise due to ‘demonstration effect’ or a rise in income of the consumers, increase in population and advertisement of new products.
On the other hand demand that depends upon the demand for some other good is called derived demand. These are goods that are used as raw materials or inputs in producing other products. For example, demand for packing materials depends upon the demand for the products for the packing of which these materials are used.
Demand for vegetable oils used in soap- making depends upon the demand for soaps. Demand for machines depends upon the demand for the products produced by these machines. Also the demand for complementary or supplementary goods is a derived. For example, petrol is a complementary good for automobiles and a chair is a complement to a table. Butter is a supplement to bread; mattress is a supplement to cot, sugar is a supplement for tea. Thus, derived demand increases or decreases with increase or decrease in demand for ‘parent product’
Demand by Market Segments and by Total Market:
If the market is large in terms of geographical spread, product usage, distribution channels, customer sizes or product varieties, and if any one or more of these differences were significant in terms of product price, profit margins, competition, seasonal patterns or cyclical sensitivity, then it may be worthwhile to distinguish the market by specific segments for a meaningful analysis. A particular market segment demand would refer to demand for the product in that specific market-segment, the total demand would mean the total demand for the product from all market segments.
Short-term and Long-term Demand:
Demand for goods that are demanded over a short period of time is referred to as short-term demand. The fashion consumer goods, goods of seasonal nature, inferior substitutes fall in this category. In contrast the demand for generic goods continues to remain for long period. Trousers, shoes, ties are goods that have long- term demand. Umbrella, raincoats, gum- boots, cold- drinks, ice creams are goods of seasonal nature. There are certain other goods that are demanded for a very short period. For example, New Year Greeting Cards, candles and crackers on the occasion of Diwali are goods of seasonal nature but for a very short duration. Electric fans, woolen garments are goods of such seasonal nature that they are used only in season but they are of durable nature.
Demand that exists for a long period of time is referred to as long-term demand Most generic good have long-term demand Long-term income, availability of better substitutes, sales promotion, consumer credit facilities are the factors that determine and influence long term demand. On the other hand product’ own price, prices of substitutes, current disposable income, adjustment time and advertisement greatly influence the short term demand. The short-term and long-term concepts of demand are useful in designing new products for established producers and choice of products for the new entrepreneurs, in pricing- policy, and in determining and phasing the advertisement expenditure.
Consumer Goods and Producers’ Goods:
Consumer goods are those goods and services that are used for final consumption by human- beings. They include clothes, residential houses, medicines, services of doctors, lawyers, shoe- makers, and lawyers etc.
On the other hand producers’ goods are those goods that are used in production of other goods. Such goods include plant and machines, buildings for the factory, human resources, raw- materials. However, the distinction made is arbitrary. The same commodity may be consumer’s good or producers’ goods depending upon its use. For example, a sofa set in the drawing room of a house is a consumer’s good, while in the reception room of a business enterprise, it is a producers’ good. Nevertheless, the distinction is useful for a proper demand analysis. While the demand for consumers’ goods depends on consumers’ income that for producers’ goods varies with the level of production.
New Demand Vs Replacement Demand :
Sometimes a distinction is made between new demand and replacement demand. When a machinery is purchased or installed new it is new demand, compared to when it is repaired and replaced by some parts or accessories
Both consumer and producer goods are further classified into durable and non-durable goods Durable goods are those whose usefulness is not exhausted in a single or short-run use. They can be used repeatedly or continuously over a period of time. Durable goods partly satisfy new demand and partly replace old items. They are more expensive than the non-durable goods. Their demand depends on current market conditions vis-à-vis expected market conditions in future. Durable goods may be consumer goods as well as producer goods. Durable consumer goods include cars, scooters, furniture, houses, clothes, shoes, washing machine etc. Durable producers’ goods include items such as buildings, office furniture and fixtures, plant and machinery etc. These goods are generally called “fixed assets’.
Non-durable goods are those goods that perish or become unusable after sometime. They can be used or consumed only once and their utility is exhausted in a single use. Non-durable goods are also classified into non-durable consumer goods and non-durable producers’ goods. The former include all items of food, drinks, soaps, cooking fuel, cosmetics, lighting, milk, fish, eggs, paper cups and plates. Raw materials, fuel and power, finishing material and packing items fall under the latter category.
Autonomous demand and derived demand :
Demand that arises on its own out of a natural desire to consume or for satisfying human wants directly is called direct or autonomous demand. Autonomous demand is not tied with any other good. It is independent of the demand for some other goods. Demand for food, clothes, shelter, soaps, toothpastes, tape recorders, TV sets, etc., is an autonomous demand. Demand for all producer goods is derived demand as they are needed to produce consumer or producer goods. However, there is hardly anything whose demand is totally independent of the demand for other goods. But the extent of this dependence varies widely from product to product. Autonomous demand may also arise due to ‘demonstration effect’ or a rise in income of the consumers, increase in population and advertisement of new products.
On the other hand demand that depends upon the demand for some other good is called derived demand. These are goods that are used as raw materials or inputs in producing other products. For example, demand for packing materials depends upon the demand for the products for the packing of which these materials are used.
Demand for vegetable oils used in soap- making depends upon the demand for soaps. Demand for machines depends upon the demand for the products produced by these machines. Also the demand for complementary or supplementary goods is a derived. For example, petrol is a complementary good for automobiles and a chair is a complement to a table. Butter is a supplement to bread; mattress is a supplement to cot, sugar is a supplement for tea. Thus, derived demand increases or decreases with increase or decrease in demand for ‘parent product’
Demand by Market Segments and by Total Market:
If the market is large in terms of geographical spread, product usage, distribution channels, customer sizes or product varieties, and if any one or more of these differences were significant in terms of product price, profit margins, competition, seasonal patterns or cyclical sensitivity, then it may be worthwhile to distinguish the market by specific segments for a meaningful analysis. A particular market segment demand would refer to demand for the product in that specific market-segment, the total demand would mean the total demand for the product from all market segments.
Short-term and Long-term Demand:
Demand for goods that are demanded over a short period of time is referred to as short-term demand. The fashion consumer goods, goods of seasonal nature, inferior substitutes fall in this category. In contrast the demand for generic goods continues to remain for long period. Trousers, shoes, ties are goods that have long- term demand. Umbrella, raincoats, gum- boots, cold- drinks, ice creams are goods of seasonal nature. There are certain other goods that are demanded for a very short period. For example, New Year Greeting Cards, candles and crackers on the occasion of Diwali are goods of seasonal nature but for a very short duration. Electric fans, woolen garments are goods of such seasonal nature that they are used only in season but they are of durable nature.
Demand that exists for a long period of time is referred to as long-term demand Most generic good have long-term demand Long-term income, availability of better substitutes, sales promotion, consumer credit facilities are the factors that determine and influence long term demand. On the other hand product’ own price, prices of substitutes, current disposable income, adjustment time and advertisement greatly influence the short term demand. The short-term and long-term concepts of demand are useful in designing new products for established producers and choice of products for the new entrepreneurs, in pricing- policy, and in determining and phasing the advertisement expenditure.
Consumer Goods and Producers’ Goods:
Consumer goods are those goods and services that are used for final consumption by human- beings. They include clothes, residential houses, medicines, services of doctors, lawyers, shoe- makers, and lawyers etc.
On the other hand producers’ goods are those goods that are used in production of other goods. Such goods include plant and machines, buildings for the factory, human resources, raw- materials. However, the distinction made is arbitrary. The same commodity may be consumer’s good or producers’ goods depending upon its use. For example, a sofa set in the drawing room of a house is a consumer’s good, while in the reception room of a business enterprise, it is a producers’ good. Nevertheless, the distinction is useful for a proper demand analysis. While the demand for consumers’ goods depends on consumers’ income that for producers’ goods varies with the level of production.
New Demand Vs Replacement Demand :
Sometimes a distinction is made between new demand and replacement demand. When a machinery is purchased or installed new it is new demand, compared to when it is repaired and replaced by some parts or accessories
Any product that has an income-elasticity of demand greater than one are called luxury goods. As the income of the consumer rises, proportionately more income is spent on such products. By contrast, products with an income-elasticity of less than one are referred to as necessary products. Luxury goods add to the pleasure and prestige of the consumer without enhancing his earning. For example, luxury cars, accommodation in 5-star hotels, travel by first-class railway AC cars, upper class air travel, jewellery can be treated as luxury goods.
A special category of luxury goods is that of prestige goods. Possession of antiques and rare paintings, diamond-studded jewellery and watches, prestigious schools, ostentatious decoration of buildings are example of prestigious goods Demand for such goods is nil below a certain level of income, as the income reaches that level consumption enters the area of luxury goods, and consumption increases more and more as income rises. Producers of prestigious and luxury goods while assessing the demand for their products consider the income changes in the richer section of the society. Curve D illustrates the demand for luxury goods.
4. Consumer’s Taste & Preference:
In general, a change in people’s taste or preferences for a product compared to other products will change the amount of the product they purchase at any given price. The more desirable people find the good, the more they will demand it. Tastes are affected by Advertising, fashion, observing other consumers, considerations of health and the experiences from consuming the good on previous occasions affect people’s taste and preferences for goods and service.
In general, a change in people’s taste or preferences for a product compared to other products will change the amount of the product they purchase at any given price. The more desirable people find the good, the more they will demand it. Tastes are affected by Advertising, fashion, observing other consumers, considerations of health and the experiences from consuming the good on previous occasions affect people’s taste and preferences for goods and service.
5. Consumers’ Information:
A change in information relating to a product can also cause the demand curve to shift. For example, when people learned about the dangers of smoking, the demand for cigarettes declined. Similarly, information about the effects of cholesterol may have reduced the demand for beef and increased the demand for chicken or vegetarian food.
A change in information relating to a product can also cause the demand curve to shift. For example, when people learned about the dangers of smoking, the demand for cigarettes declined. Similarly, information about the effects of cholesterol may have reduced the demand for beef and increased the demand for chicken or vegetarian food.
6. Advertisement Expenditure:
Advertisement expenditure has a positive relationship with demand for a commodity. As the advertisement expenditure increases, the volume of sales also increases. Advertisement expenditure is made with the objectives of informing consumers of a product’s existence and uses, differentiating the product from all available products in the market, influencing the consumer’s choice of the product against all rival products and setting new patterns of consumption. The rise in advertisement outlays, other things remaining the same, leads to an increase in the volume of sales. Symbolically, the relationship between advertisement expenditure and sales volume may be expressed as:
Advertisement expenditure has a positive relationship with demand for a commodity. As the advertisement expenditure increases, the volume of sales also increases. Advertisement expenditure is made with the objectives of informing consumers of a product’s existence and uses, differentiating the product from all available products in the market, influencing the consumer’s choice of the product against all rival products and setting new patterns of consumption. The rise in advertisement outlays, other things remaining the same, leads to an increase in the volume of sales. Symbolically, the relationship between advertisement expenditure and sales volume may be expressed as:
S = f (AD)
Graphically, the relationship between the
two factors is shown in Fig2.
7. Consumer’s Expectations:
Consumer’s expectations about a further fall or rise in future prices also affect the present demand for a commodity. If people expect the price of a good to increase, they wish to buy it before the price increase takes place. Conversely, if people expect the price to fall, they will reduce their purchases and wait for the fall in price. We can see this effect of expectations of future price changes often. In general, it is difficult to forecast the future, but sometimes consumers know quite a bit about whether the price of a good will rise or fall, and they react accordingly. Thus, demand increases if people expect the future price of the good to rise, and demand decreases if people expect the future price of the good to fall.
8. Demonstration Effect:
Affluent people often purchase first new goods or new models of existing goods as and when they are introduced into the market because either they have genuine need for them or they possess adequate purchasing power to buy them. Some other people buy these goods, even though they may not have genuine need for them. They buy them because they want to show themselves equally affluent. Enhanced purchases because of this factor are termed as ‘Demonstration-effect’. Demonstration effect has a positive effect on demand. In general, affluent people reduce or stop the consumption of those goods that are used by common people. This factor has a negative effect on the demand for a commodity and is termed as ‘Snob-effect’
Affluent people often purchase first new goods or new models of existing goods as and when they are introduced into the market because either they have genuine need for them or they possess adequate purchasing power to buy them. Some other people buy these goods, even though they may not have genuine need for them. They buy them because they want to show themselves equally affluent. Enhanced purchases because of this factor are termed as ‘Demonstration-effect’. Demonstration effect has a positive effect on demand. In general, affluent people reduce or stop the consumption of those goods that are used by common people. This factor has a negative effect on the demand for a commodity and is termed as ‘Snob-effect’
9. Consumer-Credit Facility:
Sale on credit and easy terms of credit, such as spread of installments, large number of installments and smaller down payment in cash may also influence the demand for a firm’s products. The availability of consumer credit facilities may shift demand curve to the right showing increase in demand. If the rival producers offer more concessions in credit terms, the firm’s demand will decrease and the demand curve will shift to the left.
Sale on credit and easy terms of credit, such as spread of installments, large number of installments and smaller down payment in cash may also influence the demand for a firm’s products. The availability of consumer credit facilities may shift demand curve to the right showing increase in demand. If the rival producers offer more concessions in credit terms, the firm’s demand will decrease and the demand curve will shift to the left.
10. Population of the Country:
A change in the total population, sex- ratio, age-composition or occupational structure, will change demand for a commodity. For example, when children are born, the demand for milk, milk- foods etc., will increase. Again, every year, there is an increase in the number of school-going children, college students, etc., and more quantities of school uniforms, books, etc., are demanded even though their prices have not fallen.
A change in the total population, sex- ratio, age-composition or occupational structure, will change demand for a commodity. For example, when children are born, the demand for milk, milk- foods etc., will increase. Again, every year, there is an increase in the number of school-going children, college students, etc., and more quantities of school uniforms, books, etc., are demanded even though their prices have not fallen.
11. Distribution of National Income:
The level of and distribution pattern of national income of a country also determine the market demand for a product. An increase in the national income will cause the purchase of all normal goods and services to rise. The more even distribution of national income causes the demand for essential goods higher and other kinds of good to be relatively lower.
The level of and distribution pattern of national income of a country also determine the market demand for a product. An increase in the national income will cause the purchase of all normal goods and services to rise. The more even distribution of national income causes the demand for essential goods higher and other kinds of good to be relatively lower.
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