The non-price determinants of demand can be classified into four major categories: #1 – Expected Price. The following are reasons: 1. Nature of commodity: Commodities are classified as necessities, luxuries and comforts. Seven determinants affect the demand for goods and services. A commodity has a high price elasticity of demand (or elastic demand) if it can be put into so many uses. … Determinants of Demand. The extent to which these factors influence demand depends on the nature of a product. A change in buyers’ real incomes or wealth. These are: Consumer Income: The income of the consumer also affects the elasticity of demand. Apart from the price, there are several other factors that influence the elasticity of demand. Section 6: Demand Determinants. Definition Determinants of individual demand. will have an inelastic demand because its consumptions cannot be postponed. The knowledge of the determinants of market demand for a product or service and the nature of relationship between the demand and its determinants proves very helpful in analyzing and estimating demand for the product. For example, the demand for apparel changes with change in fashion and tastes and preferences of consumers. 2. Demand Determinants. These factors are known as determinants of demand. Demand can increase or decrease. Changes in any of the following will either increase (shift right) or decrease (shift left) the demand curve: 1. ADVERTISEMENTS: Moreover, consumers purchase almost a fixed amount of a […] Reasons for a Shift in the Demand Curve. With such a commodity, if the price changes, the response of quantity demanded to the price change becomes significant when changes in quantity demanded of each use are put together. For example, seasonal changes have a significant impact on demand for many kinds of consumer goods. 1. The main determinants of demand are: The (unit) price of the commodity. In general, following factors determine market demand for a … It may be noted at the very outset that a host of factors determines the demand for a product or service. An organization, while analyzing the effect of one particular determinant on demand, needs to assume other determinants to be constant. Price of substitute good 5. 4. The determinants of demand described above are the basic driving forces behind demand that economists often use to calculate trends. These are the determinants of the demand curve. Followings are the main determinants of elasticity of demand: Determinants 1. That is a movement along the same demand curve. The determinants of individual demand of a particular good, service or commodity refer to all the factors that determine the quantity demanded of an individual or household for the particular commodity. When factors other than price changes, demand curve will shift. Price of complementary goods. Determinants of Elasticity of Demand. However, there are many other factors that can affect demand as well. If we have to purchase any good then we might have influenced by several considerations like the amount that we want to spend for the good, our liking for … For high-income groups, the demand is said to be less elastic as the rise or fall in the price will not have much effect on the demand for a product. The knowledge of the determinants of market demand for a product and the nature of relationship between the demand and its determinants proves very helpful in analyzing and estimating demand for the product. Determinants of Demand. Unit 2. There are various factors on which the market demand and individual demand for a product depends. When the price of a particular product is expected to drop soon, then it is likely that the demand for that product may fall or … Income of buyers . In this case, the demand curve shifts to the right or to the left, respectively. Number of buyers. (i) A necessity that has no close substitute (salt, newspaper, polish etc.) The factors or components that influence the decision of households to purchase a commodity are the determinants of demand. NOTE: The price affects the quantity demanded but not the demand … When price changes, quantity demanded will change. Non-Price Determinants of Demand Graph. Tastes, preferences, and/or popularity. 3. Business managers have to consider the effects of these determinants on the demand for their products in order to run their companies efficiently and make a profit.