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Monday, 2 May 2011

Factors or causes of rise and fall in demand

According to the law of demand when the price of any commodity changes, its demand also changes. But there are certain other factors which can bring change in demand without the change in price.

Following are the important factors:

1. CHANGE IN POPULATION :- When population increases, demand for goods increases and demand falls when population falls, even price are falling.

2. CHANGE IN INCOME :- Demand may rise or fall due to change in income. Due to increase in income a consumer may purchase greater quality at the higher price.

3. CHANGE IN QUALITY OF MONEY :- If in a country quantity of money increases and due to this prices of goods will rise. But the demand for goods will not fall.

4. CHANGE IN THE PRICE OF SUBSTITUTES :- Any commodity which has close substitute, if its substitute price changes its demand will change. For example, if price of Capri soap rises, demand for Lux soap increases.

5. CHANGES IN WEATHER :- Demand is also influenced by the change in weather. For example, demand for warm clothes falls in the summer season without a rise in price.

6. CHANGE IN FASHION :- Demand may increases or decreases due to change in fashion. The demand of out of fashioned product falls without a change in price.

7. INTRODUCTION OF SUBSTITUTE :- When the substitute of any commodity is introduced in the market, its demand falls. For example, gas is a good substitute of coal. Therefore demand for coal has fallen, without a rise in its price.

8. CHANGE IN DISTRIBUTION :- In case of unequal distribution of wealth the demand for consumer goods falls. When you equalize the income distribution, money is transferred from rich to poor and demand for consumer goods increases.

9. INCREASE IN NATIONAL INCOME :- If the national income of the country is increasing fast then the demand for goods and services also rises because income of the people is also increasing.

10. CHANGE IN BUSINESS CONDITIONS :- When there is a depression in the country, demand will be smaller while during the economic prosperity demand will be greater.


ahsan raza 18 February 2012 at 02:17  

Pakistan has been facing number of problems one of them is ever that is increasing inflation.

ahsan raza 18 February 2012 at 02:18  

Pakistan has been facing number of problems one of them is ever that is increasing inflation.

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