According to economic theory, what determines the demand for a product?
According to economic theory, what determines the demand for a product? According to economic theory, the demand for a product is determined by four factors; popularity or fashion, income, the age distribution of a country and the price of related goods.
The most important of these being the income. There is a positive relationship between the income of the consumers and the demand of a normal good. The disposable income of any consumer determines how much money they have to spend on goods. With a larger income the demand for any item is more likely to increase as the consumers find it more within the range they would be willing to spend on an item, this is especially true for luxuary items. However as incomes increase the popularity of inferior goods will likey decrease as the consumer can afford to purchase goods of a 'higher standard'.
The age distribution of a country affects the demand for a product as most products have markets and are directed at certain age groups. Different age distributions results in different demands for different products. For example, in a market where there is a current trend for a new brand of sneakers the demand for this item will likely rise, especially if a large portion of the market consists of young consumers. Popularity means alternating trending products, if a celebrity endorses a product the sales for this product will likely rise whereas if a new health study is relased giving new negative insight into a product the demand for this product will fall. The popularity of a product may vary day to day, the demand for an umberella is likely to be much higher on a rainy day than on a sunny day.
The demand for goods are affected by the price of related products including the prices of substitute and complementary goods. In the case of the production of substitute goods, if the price of one product rises but the price of a substitute to this product remains unaffected by any rise in prices then the demand for the substitute
The most important of these being the income. There is a positive relationship between the income of the consumers and the demand of a normal good. The disposable income of any consumer determines how much money they have to spend on goods. With a larger income the demand for any item is more likely to increase as the consumers find it more within the range they would be willing to spend on an item, this is especially true for luxuary items. However as incomes increase the popularity of inferior goods will likey decrease as the consumer can afford to purchase goods of a 'higher standard'.
The age distribution of a country affects the demand for a product as most products have markets and are directed at certain age groups. Different age distributions results in different demands for different products. For example, in a market where there is a current trend for a new brand of sneakers the demand for this item will likely rise, especially if a large portion of the market consists of young consumers. Popularity means alternating trending products, if a celebrity endorses a product the sales for this product will likely rise whereas if a new health study is relased giving new negative insight into a product the demand for this product will fall. The popularity of a product may vary day to day, the demand for an umberella is likely to be much higher on a rainy day than on a sunny day.
The demand for goods are affected by the price of related products including the prices of substitute and complementary goods. In the case of the production of substitute goods, if the price of one product rises but the price of a substitute to this product remains unaffected by any rise in prices then the demand for the substitute