Non Price Factors or Shifts Factors Causing Changes in Demand:
Determinants of Demand:
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.
They bring about changes in demand independently of changes in price.
These non-price factors shift factors or determinants which influence demand are
as follow:
(i)
Changes in population: If the population of a country increase 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. 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 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 de 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 increases 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., 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 instance, the consumer's
demand for woolen clothes increases in winter and decreases in summer.
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