The following points highlight the twelve main causes of changes in demand for a commodity.
Some of the causes are: 1. Changes in the Price of the Commodity 2. Changes in the Quantity of Money 3. Change in Habit, Taste and Fashion 4. Change in Climate and Season 5. Inventions and Innovations and Others.
Changes in Demand Cause # 1. Changes in the Price of the Commodity:
The higher, the price of a commodity, the lower the quantity demanded. The lower the price, the higher the quantity demanded.
It means at a low market price, market demand for the product tends to be high and vice-versa.
Changes in Demand Cause # 2. Changes in the Quantity of Money:
ADVERTIsem*nTS:
A rise in the consumer’s income raises the demand for a commodity and a fall in his income reduces the demand for it.
Changes in Demand Cause # 3. Change in Habit, Taste and Fashion:
When there is a change in the tastes of consumers in favour of a commodity, say due to fashion, its demand will rise, with no change in its price, in the prices of other commodities and in the taste of the consumer. On the other hand, change in tastes against a commodity leads to a fall in its demand, other factors affecting demand remaining unchanged.
Changes in Demand Cause # 4. Change in Climate and Season:
Demand for certain products are determined by climatic or weather conditions. For example—In summer there is a greater demand for cold drinks, fans, coolers etc. Similarly, demand for umbrellas and raincoats are seasonal.
Changes in Demand Cause # 5. Change in Income and Distribution of Wealth in the Community:
If there is a change in income and if there is equal distribution of income and wealth, the market demand for many products of common consumption tends to be greater than in the case of unequal distribution.
Changes in Demand Cause # 6. The Growth of Population and the Number of Buyers in the Market:
ADVERTIsem*nTS:
The growth of population is an important and vital factor. A high growth of population over a period of time tends to imply a rising demand for essential goods and services in general. While the size of market demand for a product obviously depends on the number of buyers in the market. A large number of buyers will constitute a large demand and vice-versa.
Changes in Demand Cause # 7. Inventions and Innovations:
Introduction of new goods or substitutes as a result of inventions and innovations in a dynamic modern economy tends to adversely affect the demand for the existing products, which as a result of innovations, definitely become obsolete. For example—The advent of electronic calculations has made adding machines obsolete.
Changes in Demand Cause # 8. Social Customs and Festivals:
Demand for certain goods are determined by social customs, festivals etc. For example—During Diwali holidays, there is a greater demand for sweets and crackers and during Christmas, cakes are in more demand.
Changes in Demand Cause # 9. Taxation and Tax Structure:
A Progressively high tax rate would generally mean a low demand for goods in general and vice-versa, while a highly taxed commodity will have a relatively lower demand than an untaxed commodity—if that happens to be a remote substitute.
Changes in Demand Cause # 10. Age Structure and Sex Ratio of the Population:
ADVERTIsem*nTS:
Age structure of population determines the market demand for many products in a relative sense. If the population pyramid of a country is broad-based with a larger proportion of juvenile population, then the market demand for toys, schools etc.—goods and services required by children will be much higher than the market demand for goods needed by the elderly people.
Similarly, sex ratio has its impact on demand for many goods. An adverse sex ratio, i.e., females exceeding males in number (or males exceeding females as in Punjab) would mean a greater demand for goods required by the female population than by the male population or the reverse.
Changes in Demand Cause # 11. Community’s Common Habits and Scale of Preferences:
The market demand for a product is greatly affected by the scale of preferences by the buyers in general. For Example—When a large section of population shifts its preference from vegetarian foods to non-vegetarian foods, the demand for the former will tend to decrease and that for the latter will increase.
Changes in Demand Cause # 12. Advertisem*nt and Sales Propaganda:
Market demands for many products in the present day are influenced by the seller’s efforts through advertisem*nts and sales propaganda. Demand is created through selling efforts. Of Course, there is always a limit. When these factors change, the general demand pattern will be affected, causing a change in the market demand as a whole.
