Question

Explain any four factors affecting the demand for a commodity.

Answer 1

Four Factors Affecting the Demand for a Commodity

1. Own Price of the Commodity: Price is the most important factor that influences a consumer's decision to purchase a particular commodity. Lower price of a commodity attracts more consumers and higher price restricts their number.
2. Income of the Consumer: Income of the consumer is a key factor affecting the demand for a commodity. As income rises, people are likely to buy more of a normal commodity and vice-versa. But in case of inferior goods, an increase in income reduces the demand because the consumer shifts his consumption to superior goods.
3. Price of Related Goods: Demand for a commodity is also affected by change in prices of related goods. For example, demand for cars not only depend upon its own price (i.e. price of car) but also depends on the price of petrol or diesel.
4. Tastes and Preferences: Other things being equal, demand for those goods increases for which consumers develop strong tastes and preferences. Contrary to it, if tastes or preference for a product is fading (decreasing), its demand will decrease.