Demand refers to the number of goods or services that customers are willing and able to buy at different prices during a given time frame. The determinants of demand are factors that affect the demand for a good or service in the market. The five determinants of demand are:
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Consumer tastes and preferences: The preferences and choices of consumers are the basics of demand. The demand for a good or service is influenced by the consumers likes and dislikes, which can be described in terms of the cost, benefits, profit, and other variables.
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Number of buyers in the market: The number of buyers in the market can affect the demand for a good or service. If there are more buyers, the demand for the good or service will increase, and if there are fewer buyers, the demand will decrease.
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Consumer income: The income of consumers can affect the demand for a good or service. If the income of consumers increases, the demand for the good or service will increase, and if the income of consumers decreases, the demand will decrease.
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Price of related goods: The price of related goods can affect the demand for a good or service. If the price of a substitute good increases, the demand for the good or service will increase, and if the price of a complementary good increases, the demand for the good or service will decrease.
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Consumer expectations: Consumer expectations can affect the demand for a good or service. If consumers expect the price of a good or service to increase in the future, the demand for the good or service will increase, and if consumers expect the price to decrease in the future, the demand will decrease.
Changes in any of these determinants will shift the demand curve. For example, if consumer income increases, the demand for a good or service will increase, and the demand curve will shift to the right.