Which Factors Determine The Market Demand Curve?

Factors that influence the demand curve to shift: • Causes of shifts in demand
• Changes in disposable income
• Changes in taste and fashion (changes in preferences) - tastes and preferences are assumed to be fixed in the short-run. This assumption of fixed preferences is a necessary condition for aggregation of individual demand curves to derive market demand.
• The availability and cost of credit
• Changes in the prices of related goods (substitutes and complements)
• Population size and composition
• Expectations
• Change in education level
• Change in the geographical situation of buyers - in the basic model there are no barriers to entry and consumers and factors of production possess instantaneous mobility.
• Change in climate or weather - e.g. The demand for umbrellas increases when rain is predicted. However, this illustrates the constant shifting from practice to theory and back where the assumptions of the model are relaxed whenever necessary or convenient. A basic assumption of the standard model is that all economic factors have perfect knowledge so a consumer would never leave home without an umbrella on days when it rained.Changes that increase demand:
• Some circumstances which can cause the demand curve to shift out include:
• increase in price of a substitute
• decrease in price of complement
• increase in income if good is a normal good
• decrease in income if good is an inferior good
• increase in number of customers
Changes that decrease demand: • Some circumstances which can cause the demand curve to shift in include:
• decrease in price of a substitute
• increase in price of a complement
• decrease in income if good is normal good
• increase in income if good is inferior good
• decrease in number of customers

Demand is the quantity of a good buyers wish and are able to purchase at each conceivable price over a given period of time. Law of demand says, when the price of a good rises, the quantity demanded will fall, other things being equal. Quantity demanded – the amount of a good that a consumer is willing and able to buy at a given price over a given period of time.   DEMAND CURVE: DEFINITION  Demand schedule for an individual economic agent is a table reflecting different quantities that an agent is willing and able to buy at a various prices over a given period of time  Market demand schedule is a table showing the different total quantities of a good that consumers are willing and able to purchase over a given period of time    Demand curve (1) is a graph showing the relationship between the price of a good and the quantity of the good demanded over a given period of time. (2) Graph curve that normally slopes downward towards the right of the chart (except for a Giffen good, where it slopes toward the left), showing quantity of a product (good or service) demanded at different price levels. Customarily, the price is plotted on vertical ('Y') axis and quantity on the horizontal ('X') axis, and it is assumed that (in the short run) income levels, price of substitutes, and customer preferences, remain unchanged. Demand curves of the individual products are aggregated to give a market demand curve and, when drawn together with the supply curves, show the equilibrium price at the intersection of the two curves.  Factors that shift demand curve: • Causes of shifts in demand • Changes in disposable income • Changes in taste and fashion (changes in preferences) - tastes and preferences are assumed to be fixed in the short-run. This assumption of fixed preferences is a necessary condition for aggregation of individual demand curves to derive market demand. • The availability and cost of credit • Changes in the prices of related goods (substitutes and complements) • Population size and composition • Expectations • Change in education level • Change in the geographical situation of buyers - in the basic model there are no barriers to entry and consumers and factors of production possess instantaneous mobility. • Change in climate or weather - e.g. The demand for umbrellas increases when rain is predicted. However, this illustrates the constant shifting from practice to theory and back where the assumptions of the model are relaxed whenever necessary or convenient. A basic assumption of the standard model is that all economic factors have perfect knowledge so a consumer would never leave home without an umbrella on days when it rained.

Some of the factors that influence the demand of a given product include the following:-

• Price of the good in the market


• Level of income


• Tastes


• Number of people willing to purchase that given commodity


• Government policy


• Price of other substitutes


• Price of other complementary commodities.

The factors which can affect the demand of goods are known as the determinants of demand. There are some important factors which can affect the demand of products. Income of the consumer is the major factor for increasing or decreasing demand. With the increase in income demand of a product can go up, if it is normal good and if demands go down then it will be an inferior good. Secondly, number of buyers can also affect the demand. If number of buyers increases then demand goes up. Price of products can also play an important role in determining the demand of the product like if prices increases, then demand can go down. Even if the prices of substitute changes, it will also have an impact. With the increase in substitute's price, demand of product of other company increases. Other determinants include the tastes of the customers. Even the expectations of consumer can increase or decrease the demand of products. Moreover, the quality of the products also have a positive impact on the demand of goods.

The factors which can impact the demand of a product are known as determinants of demand. The first factor is the taste and preferences of the consumers. Increase in product taste can increase the demand of the product and vice versa. The second factor is the number of consumers in the market and the number is directly related with the demand of the product. The third factor is the money income of consumers. For a superior or normal good, an increase in the income can increase the demand of the product while it can decrease the demand of inferior goods. Another factor is the change in the prices of the related products for example, if the prices of related products increase then demand of your product can increase. Moreover, the expectations of the consumers about the future demand of the product also impacts it's demand like if consumer expects that in the near future the demand of a commodity will increase then the market demand of the product will increase.

Determine for demand

Taste of particular buyer

While economists generally agree on the factors influencing demand, they differ in the emphasis they place on different forces. For example, some economists concentrate primarily on monetary forces in analyzing movements in aggregate demand, especially stressing the role of the money supply. According to these economists who are often called monetarists, the supply of money is the primary determinant of the total dollar value of spending.

Other economists focus on exogenous factors instead. For example, some have argued that technological progress is one of the key determinants of booms and busts. For instance, railroads first became commercially practical in the 1850s. That innovation opened up two decades of massive investment in railroads all over the world and helped the industrial economies enjoy a sustained economic expansion.

More recently, some economists have suggested that the communications revolution of the 1990s may trigger an investment surge, as companies spend tens of billions of dollars developing mobile phone systems and building the infrastructure for the information superhighway. The mainstream of macroeconomic thinking today is an electric approach, which has its roots in the Keynesian tradition but incorporates modern development as well.

Product differentiation
features of a product
technical standards
quality standards
design standards
service standards