Factors Affecting Demand and Supply - Essay Example

The paper “Factors Affecting Demand and Supply” is an outstanding example of the essay on macro & microeconomics. Various factors that influence customers’ demand for products. These include the tastes and preferences of the consumer. A good which has greater tastes and preferences is expected to have a greater demand. Since the demand is high for the product, the demand curve is inclined to lie at a higher level. In essence, demand is dependent on the preferences, tastes, social customs, and habits of the consumer, and when these factors change, so does the demand (McGuigan et al, 2013). For instance, whenever people develop a preference for tea instead of coffee, the demand for tea will, therefore, increase while that of coffee will decrease. These are called demand fluctuations. Also, the change in demand for various goods is inclined to change whenever there are changes in fashion, as well as the pressure made by various sellers and manufacturers through advertisements. As such, the tastes and preferences for a certain product can be influenced by the marketing endeavors orchestrated by companies. In essence, advertising is viable in raising sales and profitability as it plays a huge role in raising the demand (McGuigan et al, 2013). On the contrary, whenever certain goods go out of fashion, or their tastes no longer remain favorable, the demand for them falls and profits for the product plunges. As such, the demand is dictated by customer preferences.

As such, another factor that influences the demand are advertisements, which favor the demand for goods. For this reason, as McGuigan et al. (2013) point out, whenever a company increases its advertisement expenditure, the demand for the product is inclined to rise, which in turn, promotes more sales. In essence, the advertisements influence the consumers to be for the product. These include various media, such as magazines, television, radio, and newspapers. They influence the consumer that the product is of superior quality, thereby increasing the demand.

            Demand fluctuates with changes in the price of related goods, especially which can be used as complements or substitutes. Therefore, drawing the demand curve for a specific product assumes that the prices of substitutes are constant (EconPort, n.d). For this reason, when the substitutes’ price changes, the demand curve position also changes, either upward or downward. For instance, when the price for substitute product falls, the demand for the good declines but when the price of the compliment products rises, the demand for the product rises (McGuigan et al, 2013). For example, whenever the price of tea and the consumers’ income remain constant while the price of coffee falls, they will demand less tea because coffee and tea are close substitutes. As such, whenever the coffee becomes cheaper, consumers are forced to substitute coffee for tea, thereby decreasing the tea demand.

The totality of the consumers in the market is also a factor that can influence the demand for goods. The market demand for a certain product is achieved by adding up the prospective and individual demands for the good at various prices. A greater number in the market dictates greater demand for the product. However, in this case, whenever substitutes for the product arise, the demand will decline, but when the good can be used in place of the other goods, the consumers increase, and so does the demand (Economics Help, n.d). Also, whenever the seller finds new markets, the consumers increase, and thus, the demand. Cases of population increase also dictate the increase in the number of consumers, which increases the demand for the product.

Income is also an important component that affects demand. In essence, the greater the income level, the greater the demand for goods and services. However, whenever drawing the demand curve, the income levels remain constant. In essence, a greater income translates to a greater purchasing power. As such, when the incomes increase, affordability increases, which in turn leads to greater demand (Economics Help, n.d.). However, the vice versa is also true. Whenever the income decreases, the demand also plunges, as the affordability decreases.

Consumer expectations about future prices also play a significant role in fluctuating demand. In any case, whenever consumers anticipate the increase in the price of a given product, current demand increases significantly (EconPort, n.d.). It is logical to buy now at a significantly lower price than waiting for the prices to increase. However, if they anticipate the prices to drop, then-current demand also declines in readiness to buy at lower prices.

 All these factors will influence the demand curve to fluctuate. It is the responsibility of the seller to capitalize on demand changes based on the above factors. However, in most cases, the decline in demand shifts the curve to the demand curve to the left while an increase in demand will shift the curve to the right.