Explain the general determinants in one paragraph. GENERAL DETERMINANTS OF DEMAND • Good’s own price (P) is the key determinant of demand • Other determinants of demand: 1. Level of income (Y) of the potential purchasers of the good or service. a. Normal good – a good in which an increase in income raises its sales. b. Inferior good – a good in which an increase in income causes a reduction in spending. 2. Prices of related goods a. Substitute good – a good in which can substitute for another good (competitor’s good). An increase in the price of the substitute good or service causes an increase in demand for the another good. b. Complementary good – a good that complements with another good. That is, an increase in demand for one causes an increase in demand for the other. An increase in the price of a complementary good reduces demand for the another good. 3. Population (number of consumers that consume goods/services) 4. Tastes and preferences 5. Consumer’s expectation towards future market condition (future price, product availability and future income)
Explain the general determinants in one paragraph.
GENERAL DETERMINANTS OF
• Good’s own
• Other determinants of demand:
1. Level of income (Y) of the potential purchasers of the good or service.
a. Normal good – a good in which an increase in income raises its sales.
b. Inferior good – a good in which an increase in income causes a reduction in spending.
2. Prices of related goods
a. Substitute good – a good in which can substitute for another good (competitor’s
good). An increase in the price of the substitute good or service causes an increase in
demand for the another good.
b. Complementary good – a good that complements with another good. That is, an
increase in demand for one causes an increase in demand for the other. An increase in
the price of a complementary good reduces demand for the another good.
3. Population (number of consumers that consume goods/services)
4. Tastes and preferences
5. Consumer’s expectation towards future market condition (future price, product availability
and future income)
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