Free Essay: Factors Affecting Consumer Demand
Demand is the effective desire within the consumer that can be fulfilled. Human being have unlimited yet the resources remain limited. The satisfaction of the human wants is largely determined by the production of goods and services and the pricing process involved. In economics, demand implies that there is desire, affordability as well as willingness to purchase.
There are a number of factors that affect demand. Economists have to clearly understand the complexities involved in order to effectively influence the same and have them work to their advantage. Economists refer to these factors as the determinants of demand. They include:
The lower the price of a commodity, the higher the number of consumers. When the price is set high, the demand for the commodity contracts. However, there are also other factors that come in to play. For example for products considered basic commodities like food stuffs, the equation may remain the same.
Consider an increase in the price of all milk products caused by a reduction in the production of the same. The demand for milk and milk products will remain constant because the consumers have no alternative. However, if the consumers are presented with a reasonable alternative, chances are that they will opt to get the commodity that will cost them less money. The price of related products will also affect the demand for a given commodity. For example bread and butter are related products. When the price of bread goes down, automatically the demand for butter will go up.
The buying power of a consumer is determined by the size of income they have. When the level of income increases in a given area or region, the demand for goods and services will automatically go up. When the income level of a given consumer goes up, they will buy more goods and services.
The businessman needs to understand that the income level of the consumer affects demand both positively and negatively. When the income level goes up, the consumer will prefer more refined and high quality goods and services. Therefore the demand for inferior goods and services will go down significantly.
Consumers have tastes and preferences influenced by social interactions and habits. The businessman must understand the demographics of the area where they intend to carry out business. They should also be keen to take note of nay changes in the tastes and preferences of the consumers. There are various factors that may cause a change in the preferences of the target market.
People’s expectations regarding the price of certain commodities or services will influence demand. If people expect the prices of certain commodities to shoot up in the near or distant future, they may prefer to purchase larger quantities in the present. In such a scenario, the demand for the give commodities would have gone up.
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