What Are The Major Non-Price Determinants Of Supply

February 14th, 2009 Comments off
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Changes in the determinants of demand will cause the shift of the demand curve. Price normally demands the demand of goods and services.

 

However, there are some major non-price determinants of demand which include the following:

 

1.       Consumer tastes/preference

If consumer’s preference/tastes are more favorable to certain products, there will be an increase in the demand for that product.

2.       Number of buyers in the market

If the number of buyers in the market increases as a result of population growth, there will be an increase in the demand for the goods and services.

3.       Buyers income      

If income of the buyers increases, there will be an increase in the demand for goods and services. However, in the cases of inferior products an increase in income will lead to a decrease in demand and vice versa.

4.   Seasonal factors.

During a particular season say a rainy season there tend to have higher demand for umbrellas, raincoats as compared to other times during the year.

5.       Consumer expectations of future prices and income

 

Consumer expectation is important to determine changes in demand. If people expect the price of product X to increase, there will be more demand for that product now. If people expect income level to increase, demand will also increase and vice versa.

 

6.       Prices of related goods

 

Prices of related goods also affect demand. For substitute goods, price and demand are directly related to one another. For example, if there is an increase in the natural rubber then there will then be a lower demand for synthetic rubber, its substitute.

 

For complementary goods, the price of one good and the demand for the other are inversely related. A decrease in petrol price will lead to more frequent use of cars that will increase the demand for petrol and engine oil, its complements.

 

[ See Non Price Determinants Of Supply]

 

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