Question

Explain any four factors which determine the market demand.

Answer 1

1. Population: An increase in population increases the demand or vice versa. Market demand for so many commodities has increased in India due to this factor. Several multinational companies are entering the Indian market due to its large size.
2. Season and Weather: The season and weather conditions also have an effect on consumer's demand. For example, demand for woollen clothes goes up during the winter. Fans, coolers, etc. are demanded more during the summer. Similarly, in the rainy season, umbrellas and raincoats are in great demand.
3. Government Policy: The government policy of a country can also affect the demand for a particular commodity or commodities. It may reduce the demand for a commodity by imposing a tax on it or increase the demand by lowering its price through subsidies.
4. State of Business: The prevailing business conditions in a country also affect the level of demand. For example, during boom periods, market demand will increase. On the other hand, the level of demand goes down during a period of depression.
5. Distribution of Income: If there are more poor people, the demand for necessities of life will be higher. An increase in the percentage of rich people will increase the demand for luxury goods. When the government tries to reduce inequalities in the distribution of income in society, the demand for luxurious goods reduces and the demand for essential and comfortable goods rises.
6. Advertisement: The advertisement of a product also influences its demand. For example, Anil drinks a particular brand of soft drink because his favourite actor speaks highly of it.