Factor influencing the demand

(i) Price of the commodity itself:

When a commodity is selling at a very high price, only rich people are able to buy it. So the demand of that commodity will be less. But when the price is low more and more people will be able to buy it and the demand of the commodity would be more. Thus, the demand of the commodity is greatly influenced by its price.

(ii) Prices of other related goods:

The demand for a commodity is also influenced by prices of other related goods as substitutes. Tea and coffee are substitutes to each other. A change in the prices of such commodities affects the changes in the consumption of its substitutes. For example, a change in the price of tea will change the consumption of coffee.

(iii) Level of income of the consumer:

Consumer’s demand is also influenced by the size of his income. This is but natural that with increase in the level of income, there is increase in the demand of goods and services. Increased level of real incomes creates more purchasing power in the country. As the level of income increases, the demand for goods and services also increases.

(iv) Tastes and Preferences of the Consumer:

Tastes and preferences of the consumer also influence his demand. A taste, fashions, preferences of the consumer keep on changing and is his demand.

(v) Population:

The change in the population in a country changes the demand. This change in population is in terms of change in the size and composition of population. Increase in the size of population will definitely increase the demand of commodities and services.

Again increase in the size of population also affects the composition of population. By consumption of population is meant the distribution of population in terms of the age-group, sex- ratio, and skilled or unskilled population. In a country where the majority of population is composed of minors, naturally demand for such goods will be more which interest more to minor-toys, sports goods, etc.