Saturday, 11 February 2012

Determinants of a Change in Demand

The demand for a particular product can increase or decrease for the following various reasons;

- A consumer's preference toward a good or service plays a large part in the demand for it and can be swayed by things like advertisements, reviews, seasons, celebrities, ect.
- The increase or decrease in a buyer's income will affect their capacity to purchase a product. A normal product will show an increase in demand when income increases and an inferior product will increase in demand when income decreases.
- A change in the price of a related product will also influence a consumer's desire and capability to consume particular goods. Substitute products, which are very similar to one another, will have a direct affect on each others demand, depending on their price. Complimentary products tend to be purchased together, therefore their demands are also inter-related.
- The future expectations of prices, sales, shortages, or incomes will alter when and how much of a good or service is demanded at a particular time.
- The final determinants that can change demand are an increase or decrease in the population or a change in the distribution of who is earning income in a specific demographic.

In the past five years, the demand for Mp3 players has dramatically decreased. Due to a change in the preference of consumers, who are now listening to music on their Blackberrys or iPhones, the need for a portable music device is becoming obsolete. The following table and graph will illustrate the decrease in the monthly demand from 2007 to 2012.


 
Price
Demand in 2007
Demand in 2012
175
100
10
150
200
20
125
300
30
100
400
40
75
500
50

1 comment:

  1. Great Post. Has any element of the change also been attributed to age, such that older folks (like myself) have iphone, but younger kids can still only afford mp3's?

    ReplyDelete