Sunday 12 October 2008

The determinant of Demand In Market

I’m having the presentation in this week. This is what I will talk about in the presentation. Hope everybody read it and prepare question 2 me …..
The determinant of Demand In Market

First of all, we must avoid the confusing between two definition : Demand and Quantity Demand is DIFFERENT
Quantity demanded
is amount of good or service that buyers desire to purchase at a particular price during some period. Quantity demanded changes according to the price. Quantity demanded is basically a point on the demand curve, while demand is the actual curve
Change in Demand: when the demand curve shifts left or right due to a change in one or more of the determinants of demand. A change in demand means that for the same price, customers are now willing to buy more of a certain product.

Change in demand may be caused by these following determinants of demand (TOIESS):
-Taste ( or the consumer preferences) . For example, in a same store, there are two kinds of juice, orange juice and apple juice. If the consumers tend to prefer orange juice more than apple juice, it will cause the shift in the demand curve : shift to the right in orange juice demand curve and to the left of apple juice
-Other Related goods. We all know about the complement and substitute in cross elasticity . ( negative value for complement and positive value for substitute goods).
1- Substitute : the increase in price of a product will increase the demand of the other product. Ex : the increase in price of play station 3 will make the demand of xbox360 shift to the right.
2-Complement : the increase in price of a product will decrease demand of the other.
Ex : the increase in price of oil will cause the reduce in quantity demand of cars using oil as fuel.
-Expectations:
The expectation of higher price in the future will make the consumer buy more right now. And vise versa, if the expectation of lower price in the future will cause the reduce in demand. Investors predicting a higher price of a product in future, so they will tend to buy it and sell it to gain profit.
-Income :
The change in income will cause the change in demand because the power of buying of the consumer is higher. It will have two situation
The demand curve will shift to the right with normal good : (which have positive YED value) . If you have higher wages, you may be change a new car, or change the newest cell phone
The demand curve will shift to the left with inferior good : (which have negative YED value). If you earn more, you will not buy second hand goods, or don’t want to buy cheap food.
-Size of Market
More potential consumers make a greater potential demand for certain products.
The demand for machinery to construct building increase in Iraq, Afghanistan because
-Special Circumstances
Natural disasters or any unexpected situations that might affect demand
Ex: During summer, a chill comes along for a week, disrupting the sale of ice creams
Ex: News report toxic material found in corn canes, as a result, consumers stop buying corn canes

3 comments:

chris sivewright said...

Types of demand:

notional
effective
latent
potential

Hai Long said...

So is all of this is wrong Mr Chris .... ? The determinant of Demand in market is means that 4 types of demand ?

ben said...

what is the determinants of market failure???