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Theory Of Demand - Essay Example

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The essay "Theory Of Demand" works around various aspects that explain the fundamental basics of the Demand Theory…
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Theory Of Demand
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Download file to see previous pages In other words, there is a likelihood of people tending to purchase a different product that can give them the same satisfaction or other alternatives in which they spend a smaller amount of money (Cachon & Terwiesch, 47). The relationship between price and quantity demanded is represented in the figure below (fig. 1)
There are various determinants of the quantity demanded, which lead to a shift in the demand curve. The shift is either outwards whereby the demand for a product goes up or goes down (inward shift). Consumer tastes and preferences are among the determinants that can either increase or decrease the demand (Fairey, 31). For example, if consumers gain confidence in Moldovan Wine, they are likely to buy more than other kinds of wines. In such a situation, even if the price increases and that of other wines reduce, the demand may not react to the price changes. The tastes of consumers shift the demand to the right. On the other hand, if it does not satisfy consumer preferences, the demand falls (shifts to the left).
The number of consumers in a particular market is also a major determinant of demand. If more consumers enter the market, the quantity demanded increases (Cachon & Terwiesch, 66). For example, if the number of Russian and other nationals in the region increases in South Africa during the FIFA world cup, the demand for Miestii Mici may rise as people tend to get a taste of the wine that they are used to. In the regions where the wine is not known to many consumers, less of it is consumed. The income of consumers also affects the demand for a commodity. For example, Miestii Mici is affordable to even low-income consumers and therefore the demand is usually high among people of diverse income levels. ...Download file to see next pages Read More
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