Essay on determinants of demand report

Determinants of Demand
Yiadom Adu
Introduction to Microeconomics/ECO102
March 11, 2013
Alan Beideck

Determinants demand
This report will discuss about the determinants of demand and determine how they are shift in a demand curve. This report will also give definitions for the factors that are determinates of demand and also give a real life example. Demand can be describe as possessing a product or making use of a service, combined with the ability to purchase it. In other words, determinants of demand refer to all the factors that determine the quantity demanded of an individual or household for the particular goods or product. However, the distinction between demand and consumption as an equilibrium quantity at a given price is frequently ignored.
The development of gap type models illustrates the common approach of projecting demand as a fixed quantity independent of price. Determinants of demands are consumers’ income, prices of other goods, consumers’ expectations, number of consumers and consumer tastes.
Consumers’ Income
Consumers’ income is very important in terms of determinant of demand, as is the level of income evident in the appropriate country under analysis. In other words, the higher the level of a personal income, the higher the demand for a typical goods or product. More of a goods or products will be chosen at a given price where income is higher for consumers. As a result, determinants of demand normally exploit some form of income measure, including Gross Domestic Product (GDP).

Prices of other Goods
For a product or goods to be a substitute of another good, it must share a particular relationship with that good. However, when a product price increases, the demand for its substitute will increase because consumers will be willing to buy a cheaper product than an expensive product. When a product price decreases, the demand for its substitute will decrease as well. For example, if dunkin donuts increases prices on coffee tea, the demand for chocolate tea will increase.
Consumers’ Expectations
Consumers’ current demand of a product will increase if they expect higher future prices for the product. Therefore, consumers’ demand will decrease if they expect lower future prices. For example, if the price for orange soda will increase in the future, more consumers will purchase it immediately rather than purchase product in the future. However, if orange soda is expected to be lower in future prices, the demand will decrease, as people will wait till it become cheaper in the future.
In other words, consumers’ future income will increase current demand if they expect higher future income but, their demand will decrease if they expect lower future income. (Determinants of demand)
Number of Consumers
Population of consumers is major part of determinant of demand, as products do not necessarily enter final consumer markets, the actual markets are largely presumed to be functionally related to consumers’ population. Growing populations increase certain goods such as food, cars, etc., because demand is likely to increase.
Consumer Tastes
Consumers taste can result in a favorable change to an increase in demand of product or goods. Meanwhile, an unfavorable consumer taste change lead to a decrease of a particular goods or product in the market. Consumers tend to purchase goods that come with satisfaction.
Conclusion
In conclusion, supply and demand is very important in terms of economical view, as produces are important to world market as they have to satisfy consumers’ needs. Consumers tend to demand goods or product from producers in the market. However, the prices of this particular goods or products have to meet the standard and fit consumers’ income in other to have good economical market. Most consumers consider buying cheaper products rather than expensive products in the market. As stated in this paper, if demand of a particular goods or product goes higher

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