Factors Affecting Demand Essay

617 Words Feb 4th, 2012 3 Pages
Factors Affecting Demand
According to the law of demand when the price of a commodity increases the demand will decrease and vice versa. It states that price is the main factor that affects the demand for any product, though there are lots of many other factors. These other factors directly/ indirectly affect the demand. If these factor changes, demand also changes. This means these factors determine demand for a commodity on the following grounds.
• Price of the Commodity: The quantity demanded of a commodity is greatly influenced by the price of that commodity. A rise in the price of the commodity will lower the demand of that commodity and vice versa. The price is the most important factor that determines the demand of the product.
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• Consumer’s Expectation: This is another influencing factor for quantity demand of goods. If consumers expect a rise in the price of the commodity in the future, they will demand more of the product at present even when the price does not change. On the other hand, if the consumer’s expected price to go down in future, they will postpone their present demand of goods.
• Size of Population: The nature of demand also depends on the size of the population. When the size of the population increases than the demand for the goods and services also increases and vice versa.
• Advertisement: People are mostly attracted by advertisement and publicity. Goods that are widely advertised become popular and result in additional demand of these goods. Old branded goods relatively go out of demand than the new brand. Due to the high advertisement new demand for the new brand goods goes u.
• Government Policy: Government policy affects the demand for commodities through taxation. High tax imposing commodity increases its price and results fall down in demand. Similarly, financial help from the government increases the demand for the product as it can be priced lower.
• Climate and Weather: The climate of an area and the weather prevailing there has a decisive effect on consumer’s demand. In cold areas woolen cloth is demanded high. During hot summer days, ice cream is very much demand. On a cool

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