1. Out of al the reasons for change in demand, which do you feel occurs the most
ID: 359918 • Letter: 1
Question
1. Out of al the reasons for change in demand, which do you feel occurs the most and has the most significant impact?
2. Can you give an example of the law of demand in the local market?
MARKET ANALYSIS
A market is an institutional arrangement under which buyers
and sellers can exchange some quantity of a good or service
at a mutually agreeable price. Markets provide framework for
the analysis of the force demand and supply that, together,
determine commodity and recourse prices.
What is a market?
The Perfect Competition is a market structure where a large
number of buyers and sellers are present, and all are engaged in
the buying and selling of the homogeneous products at a single
price prevailing in the market.
In other words, perfect competition also referred to as a pure
competition, exists when there is no direct competition between
the rivals and all sell identically the same products at a single
price.
The law of demand states that other factors being constant
(cetris peribus), price and quantity demand of any good and
service are inversely related to each other. When the price of a
product increases, the demand for the same product will fall.
Description: Law of demand explains consumer choice
behavior when the price changes. In the market, assuming other
factors affecting demand being constant, when the price of a
good rises, it leads to a fall in the demand of that good. This is
the natural consumer choice behavior. This happens because a
consumer hesitates to spend more for the good with the fear of
going out of cash.
Law of Demand
Law of Demand
The above diagram shows the demand curve which is downward
sloping. Clearly when the price of the commodity increases from
price p3 to p2, then its quantity demand comes down from Q3 to
Q2 and then to Q3 and vice versa.
https://economictimes.indiatimes.com/definition/law-of-demand
Market demand provides the total quantity demanded by
all consumers. In other words, it represents the aggregate
of all individual demands. There are two basic types of
market demand: primary and selective. Primary demand
is the total demand for all of the brands that represent a
given product or service, such as all phones or all highend
watches. Selective demand is the demand for one
particular brand of product or service, such as the iPhone
or a Michele watch.
Market Demand Curve
Market demand is an important economic marker because it
reflects the competitiveness of a marketplace, a consumer’s
willingness to buy certain products and the ability of a
company to leverage itself in a competitive landscape. If
market demand is low, it signals to a company that they should
terminate a product or service, or restructure it so that it is
more appealing to consumers.
The demand curve can show the relationship between the
price of an item and the amount of said item that the
consumers are willing and able to purchase at given fair price.
http://smallbusiness.chron.com/difference-betweenMarket
Demand Curve
continued…
The demand curve can shift so more of less commodity
would be demanded at commodity price. The entire demand
curve for a commodity would shift with a change in:
Consumers’ incomes
Consumer tastes
The price of related commodities
The number of consumers in the market
Any other variable held constant in drawing a demand
curve
Changes in Demand
Changes in Demand
A, B and C are points on the demand curve. Each point on the curve
reflects a direct correlation between quantity demanded (Q) and price
(P). So, at point A, the quantity demanded will be Q1 and the price will
be P1, and so on. The demand relationship curve illustrates the
negative relationship between price and quantity demanded. The
higher the price of a good the lower the quantity demanded (A), and
the lower the price, the more the good will be in demand (C).
http://www.investopedia.com/university/economics/
Changes in Demand Cause # 1. Changes in the Price of
the Commodity
Changes in Demand Cause # 2. Changes in the Quantity
of Money
Changes in Demand Cause # 3. Change in Habit, Taste
and Fashion
Changes in Demand Cause # 4. Change in Climate and
Season
Changes in Demand Cause # 5. Change in Income and
Distribution of Wealth in the Community
Changes in Demand Cause # 6. The Growth of
Population and the Number of Buyers in the Market
Reasons for Change in
Demands
Changes in Demand Cause # 7. Inventions and
Innovations
Changes in Demand Cause # 8. Social Customs and
Festivals
Changes in Demand Cause # 9. Taxation and Tax
Structure
Changes in Demand Cause # 10. Age Structure and
Sex Ratio of the Population
Changes in Demand Cause # 10. Age Structure and
Sex Ratio of the Population
Changes in Demand Cause # 12. Advertisement and
Sales Propaganda
http://www.economicsdiscussion.net/law-of-demand/
Explanation / Answer
1. I think substitute goods play the most important role and take place most often to change demand. When people have access to appropriate substitutes, they easily switch to the substitute product. Companies always try to create substitutes to gain market share from competitors. Therefore, new goods and services arrive in the market quite often. Also, when there are better products available in the market, consumers switch to that product. This creates significant change in the demand for the original good.
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