Determinants of quantity demanded of a commodity
- The price of the commodity .The higher the price, the lower the quantity demanded and the lower the price, the higher the quantity demanded of the commodity.
- The nature of tastes and preferences. Favorable tastes and preferences by the consumer increase the quantity demanded of the commodity but unfavorable tastes and preferences decrease the quantity demanded.
- The price of related commodities. An increase in the price of the substitute increases the demand for the commodity in question but a reduction in the price of the substitute reduces the demand for the commodity in
- Price of complements. An increase in the price of the complement leads to a fall in the demand of the commodity in question and a fall in the price of the complement leads to an increase in demand for the commodity in question.
- Government policy. An increase in taxes on the commodity by the government leads to a decline in quantity demanded of the commodity but subsidization to consumers by the government encourages the consumption of the commodity and therefore quantity demanded Increases.
- Population size and structure. A population comprised of a big percentage of middle and high income earners increases the quantity demanded of the commodity but a population with a big percentage of low income earners leads to a fall in quantity demanded of the commodity.
- The nature of income distribution. Even distribution of income among the consumers increases the quantity demanded of the commodity but uneven distribution of income reduces the demand for the commodity.
- The level of the consumers’ income. This depends on the nature of the commodity, that is, normal good, a necessity or an inferior good.
- For a normal good, an increase in the consumers’ income increases the quantity demanded of a commodity and the decrease in the consumers’ income leads to decrease in the quantity demanded.
- For the necessity, an increase or decrease in the consumers’ income does not affect quantity demanded of the commodity.
- For the inferior good, an increase in consumers’ income leads to the decrease in quantity demanded and a decrease in consumers’ income increases the quantity The three situations are illustrated using the angle curve
- Future price speculation. An expected future increase in the price of a commodity increases its current demand but an expected future reduction in the price reduces the quantity demand for the commodity with the hope of consuming more in future at a lower price.
- Seasonal factors. In certain seasons of the year, the demand for some commodities increases or decreases e.g. in the rainy season, there is high demand for rain coats and their demand decreases in the dry season.
- Religion and culture The demand for pork is low in places where there are many Moslems as compared to places where there are many Christians especially
- Sex of the consumer. Some commodities are demanded by a particular sex e.g. the demand for shirts is likely to be high in places where there are many males as compared to females. Also, the demand for sweets is likely to be high in a girls’ school as compared to a boys’
- Marital status. For example, the demand for wedding rings is high in a society where there are many married couples as compared to that dominated by singles.
- Level of education. For example, the demand for scholastic materials is high in places where there are many people going to school as compared to places where there are few students.
CATEGORIES Economics
TAGS Dr. Bbosa Science
