Determinants Of Market Demand                   

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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. It may be noted at the very outset that a host of factors determines the demand for a product. In general, following factors determine market demand for a good:

  • Price of the good- .
  • Price of the related goods-substitutes, complements and

Supplements

  • Level of consumers’ income
  • Consumers’ taste and preference

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  • Consumers’ expectations about future price and supply position
  • Demonstration effect and ‘bend-wagon effect’
  • Consumer-credit facility

These factors also include factors such as off-season discounts and gifts on purchase of a good, level of taxation and general social and political environment of the country. However, all these factors are not equally important. Besides, some of them are not quantifiable. For example, consumer’s preferences, utility, demonstration effect and expectations, are difficult to measure.

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