economics: non price determinants of demand

WETPIG + EGYPTS

expectations of prices and income

DEMAND

consumer’s expectations of the future will affect their decision to purchase now

• if they expect the price to ↑ in the future, they will buy now → current demand ↑

• if they expect the price to ↓ in the future, they will postpone purchase now → current demand ↓

ease of borrowing

DEMAND

when banks are more willing to lend, consumers are more willing to consume (borrow money to pay for goods and services and consume beyond their income)

• ↓ interest rate → ↓ cost of borrowing → greater incentive to buy goods on credit (more willing and able to purchase big ticket items) → ↑ demand

government policies

DEMAND

govt. policies (ie. campaigns against goods like cigarettes / bans ) → influence consumer tastes and preferences for goods unfavourably → ↓ demand for such goods

govt. policies (ie. increase in direct taxes) → ↓ consumer disposable income → ↓ demand for such goods

income

DEMAND

normal goods: goods whose demand varies directly w income

inferior goods: goods whose demand varies inversely w income

• when income ↑ → purchasing power of consumers ↑ → consumers more willing and able to buy good at each price → ↑ demand

price of related goods (substitutes + complementary)

DEMAND

complements: goods used in conjunction with eo

price of good ↑, demand of good ↓, demand of complement ↓

substitutes: goods used in place w eo

price of good ↑, demand of good ↓, demand of substitute ↑

population size + composition

DEMAND

• ↑ population size → ↑ no. of consumers → ↑ demand for goods and services

• ↑ proportion of age group (ie. elders) → ↑ demand for commodities + amenities commonly used by this age group

taste + preferences

DEMAND

• tastes in favour →↑ demand

seasonal factors

DEMAND

• during the season → demand ↑ (ie. winter season→ winter clothing demand ↑)