Factors Affecting Demand

Factors Affecting Demand

Fashion, taste and climate. The effect of fashion on demand can be clearly seen in the changing demand for ladies fashion apparel. For instance, hot pants were very popular at one time until there were replaced by another fad. Taste refers to the general reference of a population or a particular individual. One example of a change towards fast food. Climate also influences demand, for example, in hot weather, the demand for ice-kacang will increase.

Change in income. This effect both the individual as well as national levels. Generally, the higher the individual income, the higher would be the demand for goods and services. A rich person will have more cars than one who is not as rich. At the national level, the higher the national income of the country, (for example, the USA as opposed to India or Singapore as opposed to Sri Lanka), the higher will be the market demand. Changes in the distribution of income will also effect demand. If there is greater income equality, the poor will increase their demand and total demand will rise.

Changes in population would generally lead to an increase in demand especially in developed economies such as the USA, Switzerland and Japan. In Singapore, with the population increasing, there is a greater demand for housing, sports facilities, schools etc. In terms of population structure, the different age groups influence demand differently. The young will demand more educational toys, books, etc., while the older population will demand a different list of goods and services.

Changes in the price of related goods. There are two groups,

Complementary goods, for example, video cassette recorder (VCR) and video tapes, pen and ink, bread and butter etc. Here, an increase in the price of one (for example, the video cassette recorder (VCR) will bring about a fall in the demand for the other (for example, video tapes)).

Substitute goods, for example, spectacles versus contact lens, jam versus...