The market, first of all, represents the very sphere where supply and demand interact with each other . Thus, the aggregate of buyers is a force that forms in the market the demand for different groups of goods. There are certain factors that determine demand. However, first you need to understand what this concept means.
Demand is an indicator of the purchasing power of customers for a particular product and a given set price. It is characterized by its size. It determines the willingness of the consumer to purchase this product in this price category. This implies a combination of simultaneous necessity and the possibility of purchasing the specified product in a specific quantity. Obviously, demand only indicates potential solvent demand. In other words, its value tells us how much product can and is willing to be purchased by customers. And this does not mean at all that the transaction will take place. Suppose that a manufacturer cannot cover the arising need for a product with its capacities. Also there is such a thing - individual demand. This value characterizes the needs and capabilities of a particular customer. And finally, total demand is determined by the totality of customers that shape the market.
The economy studies little of individual demand, since the factors determining it in such a narrow segment practically do not give any idea of the big picture. For example, a single buyer may not feel the need for a product that is generally very popular.
For convenience, demand factors are divided into two groups. Consider price and non-price determinants. It is necessary to understand that they mutually influence and mutually modify each other.
Price factors of demand
- Actually the price of the goods - the interdependence of value and demand among themselves is completely obvious.
- The price of the associated product. Here the relationship works in different ways. For example, an increase in the price of tea will lead to an increase in demand for coffee, while an increase in the cost of gasoline will lead to a decrease in the demand for equipment using such fuel in work.
Non-price demand factors
- The amount of consumer income. Higher salaries will necessarily lead to increased demand. The only thing to keep in mind is that it will not grow on all groups of goods, but even fall on some. So, the demand for low-quality, and, consequently, cheap products will collapse sharply. That is, growth will be observed only on the normal and higher categories of goods, while the lower category will be unclaimed.
- Demand factors include not the most obvious things. It is fashion and taste. After all, the consumer is inclined, under the influence of various factors, including advertising, to change his preferences, which will lead to a change in demand. This determinant has little effect on products intended for long-term use.
- The number of consumers. There is an obvious relationship. If the number of customers increases, then demand naturally grows. This is often associated with human migration, a change in population.
- Price for substitutes. If the product has an analogue that is designed to perform the same functions, then the following pattern will be observed. Falling prices for analogues will lead to a decrease in demand for this product, and vice versa, an increase in their value will significantly increase it. The specified factor does not affect the product if there are very few substitutes or none at all.
- Consumer expectations. A factor that is difficult to take into account in models, since it is difficult to predict. For example, consumers decide that tomorrow there will be a shortage of a certain product and purchase all its possible stocks.
Conclusion: the influence of any type of demand for a product substantially depends on the product itself.