WHAT ARE THE FACTORS DETERMINANTS OF INDIVIDUAL DEMAND




Introduction: -The determinants of demand can be explained form the viewpoint of ‘Individual demand’ is as follows.It refers to the quantity of a commodity purchased by an individual at different prices, at a given time and place.



Determinants of individual demand for a commodity:


1.      Price: -Demand for a commodity is mainly influenced by its price. Demand varies inversely with price. Normally, more quantity is demanded at lower prices and less quantity is demanded at higher price.

2.      Price of substitute: -If a substitute is available at a lower price, people will demand cheaper substitute goods than costly goods.


3.      Price of complementary goods: -Complementary goods have joint demand. More than two or more gods are jointly demanded to satisfy a want. for example, car and petrol, paper and pen, etc. in such a case, a change in the price of one commodity would also affect the demand for other commodity. If the prices of the petrol rise, the demand for car would fall and vie versa.


4.      Income: -Purchasing power or ability to pay is the basic requirement for a demand. Disposable income is the income at the disposal of the people after paying direct taxes such as income tax. Generally, rich consumers buy more goods and service than the poor people do.


5.      Utility: -Utility is the basic purpose for demanding a commodity. If a commodity does not provide utility to the consumer, he will not demand it. For examples, there is no demand for cigarettes for a non-smoker.   


6.      Quality: -The better the quality, the higher is the demand. Individual will buy a product of better quality even if the price is more.


7.      Taste and Habit: -Demand for a commodity depends on taste, fashion and habit. A consumer will buy certain goods on account of force of habit e.g. Cigarette, tobacco, pan masala, wines etc. Therefore the quantity demands of these goods would change when there is a change in habit, such as giving up smoking, wines etc.



8.      Advertisement and salesmanship: -Advertising and salesmanship have a tremendous influence on consumers; choice. The demand for many products such as cosmetics, soft drinks, home appliances and consumer durables etc. is promoted through these methods.

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