What Are The Determinants Of Demand Explained?

Demand represents the willingness and ability to purchase. There are five main determinants of demand:
• The first one is income level, which directly represents the purchasing power of people. As the income level rises, people are able to purchase a larger quantity or a wider selection of goods.
• Population and its growth rate is also a determinant because as there are more consumers, there will be more demand and consumption will be high.
• Performance of related industries is also important because the goods might need the help of the other industries before they reach the final consumers. For example the demand for fast moving consumer goods is dependent on wholesalers and retailers. The timber is dependent on let’s say the furniture industry’s demand.
• Availability and price of substitute goods is very important. The demand for your good will not be as high if there are alternatives available. On the other hand your demand may be higher then competitor’s because of lower price.
• Last but not the least are the consumer’s preferences and tastes. This determines what brands people buy and the demand for the good depending on what they want.