Factors affecting demand

Question 1

What factors affecting the demand?

Answer 1

Income. 
Quality. 
Advertising
Substitutes. 
Complements. 
Weather
Expectations of future price increases.

Question 2

How does income affect demand?

Answer 2

An increase in disposable income enabling consumers to be able to afford more goods. Higher income could occur for a variety of reasons, such as higher wages and lower taxes.

Question 3

How does Quality affect demand?

Answer 3

An increase in the quality of the good e.g. better quality digital cameras encourage people to buy one.

Question 4

How does advertising affect demand?

Answer 4

Can increase brand loyalty to the goods and increase demand. For example, higher spending on advertising by Coca Cola has increased global sales.

Question 5

How does substitutes affect demand?

Answer 5

An increase in the price of substitutes, e.g. if the price of Samsung mobile phones increases, this will increase the demand for Apple iPhones – a major substitute for the Samsung.

Question 6

How does compliments affect demand?

Answer 6

A fall in the price of complements will increase demand. E.g. a lower price of Play Station 2 will increase the demand for compatible Play Station games.

Question 7

How does weather affect demand?

Answer 7

In cold weather there will be increased demand for fuel and warm weather clothes.

Question 8

How does expectations of future prices affect demand?

Answer 8

Expectations of future price increases. A commodity like gold may be bought due to speculative reasons; if you think it might go up in the future, you will buy now.

Question 9

What is effective demand?

Answer 9

This occurs when a consumers desire to buy a good can be backed up by his ability to afford it.

Question 10

What is derived demand?

Answer 10

This occurs when a good or factor of production such as labour is demanded for another reason

Question 11

What is joint demand?

Answer 11

Goods bought together e.g. printer and printer ink.