Explain the difference between a change in demand and a change in the quantity demanded. List and discuss at least 5 factors tha - Essay Example

Download file to see previous pages... Thus the factors that determine demand can broadly be categorized into two categories; price determinants and non-price determinants. Presence of these two distinct determinants of demand gives rise to two different but equally important concepts; change in quantity demanded and change in demand. 1. Change in Quantity Demanded. A change in quantity demanded refers to the variation in consumers’ demand of a commodity due to a change in its price, other factors remaining constant. Thus, the only factor that causes a change in quantity demanded is price. In case of change in quantity demanded there is upward or downward movement along the same demand curve. The change in quantity demanded is depicted in fig 1. As the price falls from p to p1, the quantity demanded increases from q to q1 and there is movement along the same demand curve from A to B. A ‘fall’ or ‘increase’ in quantity demanded due to the change in price is also termed as ‘contraction’ or ‘extension’ of demand. Fig 1: Change in Quantity Demanded 2. Change in Demand. A change in demand refers to an increase or decrease in demand that is brought about by a change in the other factors, except price. Thus a change in demand is a result of non-price determinants coming into force. ...
Unlike, change in quantity demanded, a change in demand entails a shift in the demand curve; either to the left or to the right of the original demand curve. The change in demand is depicted in fig 2. There is an increase in demand when the demand curve shifts from D1 to D2. On the other hand, decrease in demand occurs when the demand curve shifts from D1 to D3. Fig 2: Change in Demand There are numerous non-price determinants of demand that lead to a change in demand. Some of these are discussed below: 2.1 Tastes and Preferences. Tastes and preferences play a pivotal role in shaping the demand for a product or commodity. In fact, the endeavor of any marketer of goods or services is to alter the tastes and preferences of the consumers so that they like the product that is being sold. The tastes and preferences of consumers are affected by numerous factors like advertising, promotions, cultural environment, government reports etc. For example, if the findings of a government funded research study suggest that ingestion of carbonated drinks like Coke or Pepsi may be harmful to the human body, people may refrain from drinking these products and this may lead to a decrease in demand. 2.2 Prices of related products. There exist products in the market that may be substitutes or complements to the product in question. It is reasonable to expect that the prices of these related products have a bearing on the demand of a particular product. It is worthwhile to mention that if the price of a substitute changes, the demand for the product under consideration moves in the same direction as the change in the substitutes price. For e.g. in case the price of Coke increases, quantity demanded of Pepsi, a ...Download file to see next pagesRead More