While explaining the law of demand, we have stated that, other things remaining the same (cetris paribus), the demand for a commodity inversely with price per unit of time. The other things, have an important bearing on the demand for a commodity.
Non-price factors or Shift Factors or Determinants with Examples:
Factors that bring about changes in demand independently with no changes in price. These non-price factors or shift factors or determinants, which influence demand are as follow:
(i) Changes in population: If the population of a country increase due to account of immigration or through high birth rate or on account of these factors, the demand for various kinds of goods will increase even the prices remains the same. The demand curve will shift upward to the right.
The nature of the commodities demanded, will depend up to taste of the consumers. For example, if due to high net production rate, the percentage of children to the total population increases in a country, there will greater demand for toys, children food, etc. Similarly, if the percent of aged people to the total population increases, the demand for walking sticks, artificial teeth, invalid chairs, etc, will increase.
(ii) Changes in tastes: Demand for a commodity may change due to changes in tastes and fashions. For example, people develop a taste for coffee. There is then a decrease in the demand for tea. The demand curve for tea shifts to the left of the original demand curve.
Similarly women’s fashions are usually ever changing. Sometime they keep hair and sometime short. So, whenever there is a change in their hair style, the demand for hairpins, hair nets, etc,. is greatly affected.
(iii) Changes in income: When the income of consumers increase generally leads to an increase in the demand for some commodities and a decrease in the demand for other commodities. For example, when income of people increases, they begin to spend money on those which were previously regarded by them as luxuries, or semi-luxuries and reduce the expenditure on inferior goods.
Take the case of a man whose income has increased from $1000 to $20,000 per month. His consumption of wheat will go down because he now spends more money on the superior food such as cake, fish, daily products, fruits, etc.
(iv) Changes in the distributions of wealth: If an equal distribution of wealth is brought about in a country, then there will be less demand for expensive luxuries goods. There will be more demand for necessaries and comfort items.
(v) Changes in the price of substitutes: If the price of a particular commodity rises, people may stop further purchase of that commodity and spend money on its substitute which is available at a lower price. Thus we find, a change in demand can also be brought about by a change in the price of the substitute.
(vi) Changes in the state of trade: The total quantity of goods demanded is also affected by the cyclical fluctuations in economic activities. If the trade is prosperous, the demand for raw material, machinery, etc., increases. If on the other hand, the trade period is dull, the demand for, producer’s goods will fail sharply as compared to the demand for consumer goods.
(vii) Climate and weather conditions: The climate and weather conditions have an important bearing on the demand of a commodity. For example, the consumer’s demand for woollen clothes increases in winter and decreases in summer.