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Demand function depends of five factors 1. Own price of the commodity 2. Price of related goods 3. Income of the consumer 4. Consumers taste and preferences 5. Expectation of the consumer (1)Own price of the commodity : If price of commodity is decreased, then demand will be increased. Because accorRead more
Demand function depends of five factors
1. Own price of the commodity
2. Price of related goods
3. Income of the consumer
4. Consumers taste and preferences
5. Expectation of the consumer
(1)Own price of the commodity :
If price of commodity is decreased, then demand will be increased. Because according to law of demand, price is inversely proportional to demand, so according to this law if price is decreased then demand will be increased.
2. There are two types of related goods :
(1). Substituted goods :
If the commodity is a substituted good, increase in price of first good , results in increase in demand for the second good and vice verse
(2). Complimentary goods
If the commodity is a complimentary good, increase in price of first good , results in decrease in demand for the second good and vice verse .
3. Income of the consumer :
If consumers is increased then his purchasing power will be increased, so he will demand more quantity for a less price.
4. Taste and preferences :
If consumer likes the taste of the product , he will demand more quantity.
5.expectation of consumer:
If demand for a product in the future is going to increase , then the current price will be increased.